How to heal your credit report

Andy Webb 12 May 2021

Found yourself with a bad credit rating? Here's how to lift yourself out of it

Getting your credit report right

A decent credit report isn’t just a nice to have, it can save you huge amounts of cash. The better your credit history, the better deals you’ll be able to accessfrom lower rates when remortgaging through to more time at 0 per cent when transferring credit card balances.

In fact your credit report is checked any time you want to borrow money, including getting an overdraft, switching energy and if you pay for insurance monthly. And any mistakes or missing data could result in your application getting rejected.

Fortunately it’s really simple to check your reports, and it won’t cost you a penny. Here’s how to do it, plus a few simple steps you can take to help improve them,

Credit rating illustrationThe difference between credit scores and credit reports

Often you’ll hear these two terms used interchangeably, but they aren’t the same thing. Your credit report is the record of the times you’ve applied for credit, how much you owe and how you’ve paid off previous debts.

This an important part of what lenders use when considering whether they want you as a customer. But it’s not the only factor. The details you put in your application can make a huge difference too, and they might already have their own data on you from previous accounts.

Your credit score on the other hand isn’t even seen by lenders. Really it’s just a device to help us as consumers get a quick feel for the health of your report. So at a glance we can see if our report is classed as “Poor” or “Excellent” (or other stages in between). And any improvements we make to our credit file should be reflected in the score.

How to check your credit report and score

There are actually three different credit reports, each with their own scoring system. It’s worth checking all of them at least once a year.

They’re provided by three credit reference agencies: Experian, Equifax and TransUnion. Each will let you check your report directly with them, and you are able to order a free statutory report by post or online.

But you’re better off using a third party online service that provides the same data for free, along with your credit score and regular updates, such as emails each month if your score changes. They tend to update monthly rather than in real-time, but that’s perfectly good for keeping track.

You can view your Experian report via MoneySavingExpert.com, Equifax via ClearScore.com and TransUnion via CreditKarma.co.uk.

4 ways to boost your score

Once you’ve got access to your reports, you’ll probably want to see how you can improve them, and the score is a good way to see if you’re making progress. These are my top four ways to do this.

  1. Register to vote

If you aren’t on the electoral register, then this should be your priority. This helps lenders verify your identity and your address.

  1. Check for mistakes

Is there anything that looks wrong? It could be an account you thought you closed but is still open, an old address, or even links to an ex-partner. Get them all fixed.

Double check too that there aren’t any accounts that have been set up in your name without your knowledge. If that’s the case you’ll need to contact whoever the account is with to get this fraud sorted.

  1. Make payments on time every month

Missed payments will be marked as a default on your file, even if it’s just by one day. Set up direct debits to pay everything on time.

If you don’t currently have any credit accounts that help demonstrate this you could look at getting a credit building credit card. Spend a small amount on this each month (a regular expense such as groceries works well) and pay it off completely. After a while this will be reflected in your report.

  1. Manage your ‘credit utilisation’

If you’ve got a number of old cards that you don’t ever use, you might think it’s best to close them down. Well it can help. But it could also hurt your score!

Ideally you want to use below 25 per cent of the total credit available to you at any time. So if you have four cards with a total credit of £4,000 and owe £1,000 on them, that’s a credit utilisation of 25 per cent. But if you close three of the cards and have a credit limit of £1,000, you’ve suddenly maxed out to your limit - which looks bad to lenders.

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