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Did you know there are approximately 7 million card and loan applications that are rejected by companies and lenders? Most of these rejections are due to the applicants having low credit scores that make them a high risk to lend to.
If your score is on the lower side, these are a few ways to increase your credit score:

Make sure you are on the electoral roll

If you are not o the voter’s list in your area ensure that you register at your current address. Lenders first check this when an applicant applies for a loan or credit card. If your name and address are not listed the credit score will dip. Check with your local council if you are registered or not. If not then sign up asap using the online facility.

Be punctual with repayments

Whether it is your credit card bill or a mortgage you must be punctual with your repayments. Repaying on time will create a positive credit history as lenders appreciate individuals that are prompt in repayments. Those with mortgages and prompt in repayments of their premiums have it increase their credit score. Tenants can also choose to register so that their rental payments can further help to boost their credit ratings.

Open a savings account with a credit-builder

A good way to boost your credit score is to open an account with any of the credit builder apps or accounts like Pave, Bits etc. Saving a small sum every month reflects well to lenders that you are careful with handling your finances. You could set up a direct debit from your bank for a small sum that will add up within a year.

Consolidate accounts

If you have any accounts that are seldom used consider consolidating them to limit your lending to a few accounts that are well maintained that will reflect positively on your credit history and score. Accounts that are rarely used may lower the credit score because credit reference agencies evaluate the cumulative credit limit for score calculation. Also, when spending, do not use up the credit card limit and maintain a balance within limits.

Keep track of your credit history

This is easy to do but surprisingly many people overlook checking their credit history at regular intervals. It is always possible that a company or lender can make a mistake leading to inaccurate information appearing on your file. This will result in it negatively impacting the credit score. If you do notice any errors report them to the concerned lender at the earliest for it to be removed. Checking your score will not impact it as it shows up as a soft search and is only visible to the account holder. There are several ways to conduct a free credit score check online.

If you are a joint account holder with an individual their credit history also can impact your credit score if they have poor credit ratings. If there is a joint account not in use it is best to close it.

If you are planning on renting a property and are concerned about clearing your credit check read on:

Firstly, the landlord/letting agent must get the consent of an applicant to gain access to their credit file. The checks will be done by any of the 3 credit reference agencies (CRAs). The UK has TransUnion, Equifax and Experian. For the credit check, the payment is done by the entity requesting the check, not the potential tenant.

Credit Report Details

There will be different sections in the report with the prominent ones shared below responsible for clearing or failing the credit check.

• Voters/Electoral roll: This section shows if the applicant is enrolled in the electoral rolls where they lived. It is legally binding for everyone to be registered with their area’s local electoral roll. If unsure before applying for a credit check with the Electoral Registration Office of your area. Not being on the voter’s list may impact the credit check negatively with the application getting rejected.
• CCJs (County Court Judgement) letter: They form an integral part of the credit check. If an individual is issued a CCJ and there are unpaid debts it will go against the applicant. If there are any doubts about having a CCJ (before applying) contact any of the CRAs for a copy of the credit report.
• Adverse credit: It is found in the credit history of individuals that have had issues with repayment of debts. Defaults, not paying the full sum or late payments form part of having an adverse credit history.
• Affordability: One of the purposes of conducting a credit check is to confirm if the tenant can pay the rent. For this, the expenditure and income are evaluated to determine if they can afford the rent.

Not clearing a credit check

If you are not able to pass the credit check that is okay! There still is a way to get a property on rent through a guarantor as an intermediary.

Tips to ensure passing a credit check:

• Make sure that all payments are on time and up to date.
• Go through your credit report to ensure all info is accurate.
• Ensure you are on the voter’s roll in the area you stay.
• Always sign a tenancy agreement with the property’s landlord where you live currently.

Some of the other aspects a landlord/letting agent will examine during the credit check are:

Get a referral letter from your company/employer stating your designation and monthly salary. An added asset would be a letter of recommendation from your employer.

If you are on a work permit in the UK it might influence your ability to rent a property. However, getting a recommendation letter from your previous landlord could stand you in good stead.

Before you have a credit check carried out as a tenant it is best to ensure that you cross your T’s and dot your I’s before the check is carried out. However, even if you do not clear the credit check you could always use a guarantor as an intermediary.

Have you ever thought about how credit reports are created and why someone may not have a credit score? Not having a credit score can be very inconvenient especially if there is a need for credit. However, for someone without a credit history, it is an opportunity to build one.

Credit history and score

A credit score is calculated as per the information available from an individual’s credit information on their report. It tends to differ from one CRA (credit referencing agency) to another. The higher the score the better are the chances of getting credit from banks and companies.

Although having a high credit score does not always guarantee that all lenders will instantly issue credit. Some lenders look at the detailed information on the credit report first including past transactions apart from other criteria. They also may have their system of calculating the credit score.

Understanding a Credit Report and Score

There are either of these two reasons for not having a credit score:

• Lack of credit history
• The credit history is very old

Looking at both in detail: For an individual to maintain a credit score, there is the need for a credit report. Likewise having a credit history is vital for a credit report. An individual’s credit history contains the credit data submitted by any of the three CRAs (credit reference agencies) in the UK. Those that have not applied for credit in the country will not have any history, leading to no credit report or score.

For an individual in the UK without a credit history, the reasons are as follows:

Recently moved to the UK

If an individual is new to the country, their earlier credit details cannot be transferred from their country of origin to another country. Despite an individual having a very good credit report and score in their own country, they will have to start from scratch to build their credit history in the UK. Generally, it can take from 6 months upwards for the first credit report to be generated.

Never used credit

There may be some individuals that have not needed to use credit ever or because they are very young. In the case of paying bills in partnership, the name may not appear on bills. Likewise having a mobile contract in someone’s else’s name will not appear on a credit report.

Less than 18 years

For individuals that are below 18 years of age CRAs do not share credit information. Lenders are also unlikely to give credit to those below the legal age because in case of unpaid dues they cannot be taken to court.

Very old credit history

An individual might have had accounts in the UK in the past. However, there was no activity seen on them for a couple of years. In case of closure of accounts, they feature on a credit report for 6 years but after that are no longer seen in the credit history. If you have closed all your earlier accounts and not created any new ones for many years it will lead to not having a credit score. It mostly happens to expatriates that leave the UK for an extended period to live and work in another country.

In very basic terms, your credit score is a number, ranging between 0 and 999. It is an indication of how reliable you have been in the past when paying back money you have borrowed from a bank or on something like a credit card. If your credit score is high, then you stand a good chance of being approved if you are thinking of moving house and taking out a new mortgage or applying for finance for a new kitchen or large item of furniture. On the other hand, a low credit score can mean your options are limited.

Credit scores are generated by the major credit reference agencies, using what they already know about your financial history. You can get access to this information too. When you fill in an application to borrow money, the bank will look at your credit score when deciding if you’re likely to pay it back or not. Your credit score may also affect how much money the bank or other financial institution will be prepared to lend you.

Factors Impacting Your Credit Score

Your credit score is like your financial CV. If you’ve never missed a payment on a credit card and never defaulted on a loan, then this will affect your credit score in a positive way. If you have a chequered financial past, with defaults or County Court Judgements (CCJs), then this will make your credit score lower.

People who have never borrowed money and never had a credit card might find that their score is low, purely because there is no track record of them being able to borrow money and pay it back regularly.

Credit scores are calculated by looking at the different factors on your credit file. This is information recorded in a digital database, which will show all of your credit agreements such as mortgage, personal loan or credit cards. This includes finance you have taken out with someone else. The database will also show payments and will highlight any missed payments over the last six years. The score also looks at public records, mainly the electoral roll and the list of CCJs. Your credit file contains purely borrowing information, and nothing about your job, salary, spending habits or medical information.

Who Holds This Information About Me?

Banks and other lenders don’t have their own information about you, apart from any accounts you have with them. All lenders use one of the main UK credit reference agencies to help them make a decision. The three main agencies in the UK are Equifax, Experian, and TransUnion. They provide the information about you but don’t make decisions or provide recommendations to the lender. Individuals have the right to request to see the information which any of the credit referencing agencies have about them. If you come across a mistake on your record, then you have the right to ask the credit referencing agency to correct it.

What Can I Do to Influence My Score?

If you have found that you are struggling to get finance and think your credit record might be to blame, then there is lots you can do to get the numbers upwards. Firstly, get your finances in order and pay off any outstanding sums, making a plan not to get behind on payments again. Check you are listed on the electoral roll and request your credit file to make sure there are no obvious mistakes listed. If lack of a track record is the problem, think about taking out a credit card with a small limit, and paying it off in full every month.

If you are applying for credit, there’s usually a form to fill in. Lenders will look at this information when they are deciding whether or not to lend you money, so it’s important to take your time and give them the best first impression possible, without lying of course. Many banks and building societies use not only credit scoring agencies but fraud agencies too, which use software to pick up discrepancies on forms which could indicate identity theft or fraud. Check the form over for typos – have you included your postcode and given your annual not monthly salary, for example?

It’s a common misconception that the bank knows everything about us and can see the details of every account we have but this isn’t really the case. If you are applying for a loan or credit card with a specific lender, they will be able to access:

• Your track record with that lender – they will be able to access their own account data about you, showing if you have made payments on time in the past.
• Fraud information – companies in the financial services industry share information between themselves about customers making fraudulent applications.

Credit Referencing Agencies

The three big credit reference agencies in the UK are Experian Equifax, and TransUnion. All lenders will use at least one, possibly more than one. Agencies compile information from the electoral roll, and will look at court records to see who has been declared bankrupt or been given judgements against them.

Agencies can also access data from other lenders, showing whether you have applied for credit through other lenders, and showing who you might be linked to financially through having a joint account, for example. They also have information from gas and electricity bill, so being in arrears with your energy provider could go against you too. Credit referencing is a huge factor in whether you will be successful when applying for the loan or not. Credit referencing agencies just collate the information given to them and pass it on to the lenders; they don’t make decisions. Agencies handle a huge volume of information and sometimes get things wrong. If you’ve been turned down and can’t understand why, the first step is to request your file from the agency to check it over for any mistakes.

What Lenders Don’t Know About You

There are lots of myths around about what sort of information is actually on your credit file. It’s important to bear in mind that your credit file is purely your financial history and nothing more. Despite the conspiracy theories which you might hear or read about online, credit referencing agencies and lenders do not know:

• Your religion, race or ethnic background – because these facts about you are not recorded on your credit file.
• How much you earn – credit agencies don’t have access to HMRC, and can’t see how much you’re earning or paying in tax. You might be asked to state your salary on an application form though, especially for a mortgage or similar.
• Savings – although a financial product, details about money you hold in savings accounts won’t appear on a credit referencing report because you’re not borrowing anything. If you do apply for a new savings account, there will still be checks done to establish your identity to comply with money laundering law.
• Medical information – credit referencing agencies won’t have any access to your medical records, or details of any tests you are waiting to have.
• Criminal records – no credit referencing agency will have any information about any crimes you have committed in the past, unless of course, those crimes involved making fraudulent insurance claims or identity theft to apply for credit cards in someone else’s name.

One of the main tips you’ll find on any site giving advice on credit scores is to make sure you are registered to vote. But why is this so important? Why are the banks or financial institutions interested in whether we pop into the polling station to put our X on a ballot paper?

What is the Electoral Roll?

The Electoral Roll in the UK is a list of people who are eligible to vote. Whether those people actually vote or not doesn’t really matter. It’s more about having their names on the public register which links them to their home address. If lenders have no way of confirming that you live where you say you do, then they are unlikely to want to lend you any money. Even if a lender is still inclined to offer you an account, they will want to see other proof of your address and identity. Providing this extra paperwork all takes time, so being on the electoral roll just makes everything quicker and more efficient.

Other Reasons to Be on the Electoral Roll

Being on the electoral register definitely makes things easier when applying for credit, but there are other reasons why you might wish to be on the electoral register too. Many other public services need to confirm your identity too, and the electoral roll is often checked when you apply for a passport, driving licence or government benefits. Many jobs in the financial sector involve a degree of background checking before you start work and confirming that you live at the address you have given is a key aspect of this.

How Do I Register to Vote?

Even if you have no interest in politics or voting, it’s important to be on the list of voters for all of the reasons laid out above. How you register will depend on where in the UK you live. If you are a resident of England, Wales, or Scotland, then you can register to vote online. Every year, the local council will also send a letter to the house, asking for confirmation of voters registered at that address. Voters in Northern Ireland have to complete a voting registration form, which can be done online.

Students who are living away from home in Halls often find it is better to register at a permanent address such as their parents’ house. Your credit score can be adversely affected if lenders see lots of addresses over a short period of time, so rather than registering and de-registering each year, just stick with one main address.

Once you have registered to vote, it will take some time for your details to be updated on the databases held by the main credit referencing agencies. Usually, this happens within 30 days and if you’re in the habit of checking your credit score regularly, you should see your number increase when the database is updated. If, however you wait for the letter from the council to arrive in the post to register as a voter, it might take longer for your file to be updated, as councils send all the data about newly registered voters through to the council in one batch after the process has completed.

If you are not eligible to vote in the UK because you are a citizen of another country, then there are other ways round this. Credit agencies are well aware of the issue and can add a note to your file stating the reason why you are not on the electoral roll. This should make getting credit easier in those circumstances.

Credit scores influence our financial lives, determining which bank accounts we can open, and which credit cards we might get accepted for when we apply. But not everyone has an amazing credit score, with every option available to them. If you don’t have a decent credit score, then you might be limited as to which financial product you will be accepted for.

Bad credit scores are more commonly caused by defaults in your past which will show up on your credit file when you apply for a new credit card or loan. If you’ve missed payments or failed to pay altogether, then the banks will perceive you as a bad risk and won’t be keen to lend you any more money. The other main group of people who find it hard to access credit are young people, or just people who have left no footprint on the credit records in the past. From the bank’s point of view, how do they assess your likelihood to pay money back when you have no track record? Being in this position is frustrating, but there are things you can do to improve your record, making you more likely to be accepted in the future.

Credit-Building Cards

There are many credit cards on the market which are aimed at people who have either had issues with making payments in the past, or who have no credit record at all. A quick search on Google will display a list of products, offered by a wide range of providers. A good starting point is a soft search, which will indicate how likely you are to be approved for a card before making a firm application. Making too many applications will damage your history even further, so only apply for products which you stand a very good chance of being accepted for. You also have a better chance of being accepted for a card with a lower credit limit, so if you have the option to ask for a set limit, choose £500 or £1000 as a starting point.

Once you are approved for your credit card, then the key is to manage your spending carefully. This is all about showing your bank that you can be trusted to use the card responsibly and not get yourself into trouble with payments. Spend a small amount of between £50 or £100 every month on your card and settle the bill immediately. Even better, set up a direct debit from your bank account to make the payment automatically. Doing this will help you build up a track record with your credit card provider and should boost your credit score too. Don’t expect to see instant results though. It could take between 9 months and a year before you see your credit score start to climb. You should then be in a stronger position to apply for a different card, or a loan or mortgage – always doing a soft search first to check your chances of being accepted.

Other Ways of Boosting Your Credit Score

Getting a basic credit card is probably the best way of increasing your credit score but there are other ways too. Make sure you are on the electoral roll at the address where you are living and apply to see your full credit file to check there are no errors on it. Other actions such as being named on utility bills or having a mobile phone contract in your name can help too. Just make sure you have a process in place for making sure payments are made every month, in full.

Recent figures released by one of the UK’s largest credit referencing agencies show that the average British credit score has increased in 2021, despite the pandemic causing chaos with the finances of many. Credit scores from the major agencies in the UK are on a scale of 0 being the worst through to 999 being the best achievable. In 2021, the average credit score throughout the UK was 797, up from 792 in 2020 and 776 in 2019.

Emergency Payment Freeze

At the start of the Covid-19 pandemic in 2020, many banks and other financial institutions introduced payment freezes or mortgage holidays, to help customers manage on reduced furlough payments, or those who faced losing their jobs entirely in the first lockdown. As a consequence, fewer borrowers got into difficulties making repayments on their loans. With hospitality and non-essential retail closed, many consumers also found that their spending patterns changed and that reduced commuting costs and additional costs of travelling to work meant they could cut their outgoings and reduce debt as a consequence.

Regional and Age Differences

Experian also looked at how the average UK credit score varies across the country. Perhaps unsurprisingly, the people with the highest overall average credit score are found in the city of London area, closely followed by the Isles of Scilly and Wokingham in Surrey. At the other end of the scale, the areas with the lowest average scores are Blackpool, Blaenau Gwent in South Wales, and Hull.

There is also a wide gulf between average credit scores in each age group. People over 55 years of age have the highest average scores. 18–20-year-olds perhaps surprisingly score more highly than those in their 20s, possibly because people in this bracket are more likely to be living at home, without expensive loan agreements or mortgage payments. People in the 31-35 group have the lowest average credit rating, as this is the age group most likely to take loans or a new mortgage. Experian have put together an interactive map which helps you look at your own score compared with other people of the same age, or same geographic location.

Improving Your Credit Rating

Although the industry has welcomed news of the average credit score rising year on year, experts point out that there are many steps which individuals can take to influence their own credit rating. The first step is setting up a free account with one of the many sites which helps you firstly understand the credit scoring system, and lets you track your own score over time. Keeping your credit score at a healthy level will cut stress in the long run as it will make it easier to get a new loan or mortgage agreement without the worry about having your application declined. If you identify that your score is on the low side, then start to take some steps now to improve matters before applying for a new mortgage or car loan. This could be something as simple as making sure you are registered to vote at your home address and paying off your credit card in full each month.

What Is a “Good” Credit Score Anyway?

Each lender makes its own decisions about how to lend, and a poor credit score doesn’t mean you cannot access credit. However, the industry classes scores as follows:

Very Poor	0-560
Poor	561-720
Fair	721-880
Good	881-960
Excellent	961-999

A perfect score may be unrealistic for many, but for most of us, there are things we can do to improve how the banks and building societies perceive us.

Getting knocked back for credit is inconvenient and potentially embarrassing too. Whether you are accepted for a new credit card or mortgage depends in a large part on your credit score. If your credit score could be better, then here are our top tips about steps you can take to improve matters.

1 – Get your credit report

Sign up for one of the many apps which let you look at your credit score and understand how it is calculated and track how it changes over time.

2 – Understand what lenders are looking for

Obviously in general terms, lenders want to deal with people who are going to pay them back. But some lenders specialise in different segments of the market, and you can maximise your chances of success by choosing to apply to a company which markets itself to people just like you.

3 – Get on the electoral roll

One of the first checks any lender does is to verify your address details. If you’re not registered to vote they are unable to do this and are very likely to reject you. You don’t need to wait for an upcoming election to register; it can be done free of charge at any time through the government website.

4 – Before you apply, check

Rather than crossing your fingers and hoping for the best, always look at your credit score before you apply for a loan or a mortgage. Make sure there are no glaring errors and if there are, ask to have them corrected.

5 – Always make payments on time

Defaults or missed payments are the most damaging thing you can do to your credit score, with missed payments in the last year having the worst effect. Consider setting up a direct debit to make payments automatically if you’re the kind of person who forgets. If you’re in financial trouble, speak to your lender and try to negotiate reduced payments.

6 – Look at who you are financially linked to

If you have a joint account or joint utility bills with partners or flatmates with poor credit scores, this could affect your score too. Keep your finances very separate until the other parties sort themselves out. If you’ve split up from a partner, take steps to separate your finances and tell the credit reference agencies that you have done so.

7 – Soft searches and eligibility calculators

Every time you apply for credit and get rejected; this decreases your credit score a bit more. The lenders perceive this as desperation to access credit. Many sites will offer a “soft search” which means they will estimate your chances of being accepted without a hard application which damages your score.

8 – Use a credit card to build your credit history

Many young people struggle to get credit because they have nothing on their file to help the banks assess how risky they are. Get a basic credit card with a low limit and spend just £50 or £100 on it each month, and pay it off in full. You won’t pay any interest and are proving that you’re a good risk. Payday loans companies will say they can do the same thing, but these are seen as an example of poor money-management from the finance industry.

9 – Time your applications

If you know you’re likely to switch job, take time off to have a baby or have another change in circumstances, make your applications before that change happens.

10 – Cancel cards you’re not using

If you have store cards you are not using, cancel them rather than leaving the account open without using it. Having access to lots of credit, even if you are not using it, is seen negatively.