How can I build my personal credit score?

Your personal credit score plays an important part in securing new loans and credit, and can affect your financial life for better or worse. Lenders use the information in your credit file to determine whether you present a high risk of default, and if your credit score is low, you may find it difficult to obtain a mortgage or other loan. So what information does your credit file contain, and how can you build your personal credit score?

What information is in your credit file?

Your credit file contains various pieces of information about your financial history, but also personal details including your address, financial associations, County Court Judgments (CCJs), and insolvency procedures you’ve entered into in the past. So if you have a low credit score as a result of the information contained in your credit file, or you simply want to ensure you have the best chance of being accepted for a loan in the future, what steps can you take to build it up?

Electoral register

Adding your details to the electoral register adds credence to any loan applications and allows lenders to easily verify your identity – a crucial step for all financial institutions. You can register online via the government’s website, and opt out of the ‘open register’ if you’re worried about your information being used by other organisations.

Pay your bills on time

Paying your bills in full and on time is one of the most effective ways to build up your personal credit score. It shows that you can manage your money efficiently, and offers lenders more confidence that you won’t default on repayments in the future.

Close unused credit accounts

Closing credit card accounts that you no longer need may have a positive influence on your credit score. It reduces the amount of credit available to you, which lenders can look on favourably during the application process.

Check your financial associations

If you’ve ever taken out joint borrowing you may still be financially associated to the other person, but if they have a poor credit history it can negatively influence lenders’ opinion when you apply for borrowing. You can apply to have your financial association(s) ‘unlinked,’ by writing to the three main UK credit references, Experian, Equifax, and Callcredit.

Use credit to your advantage

Credit cards used in the right way can build your credit score over time. Limiting how much you spend on a credit card – only using it to buy fuel, for example, or food – and then paying it off in full at the end of the month, is one of the best ways to build up a personal credit score. It shows you can use credit responsibly, and are less likely to miss repayments based on your previous payment history.

If you would like more information on how to build your personal credit score, Scotland Debt Solutions can help. We’ll ensure you’re doing all you can to improve your credit file, and offer free consultations to all our clients.