Researching how to improve your credit score is an enormously positive step for everyone to take, but especially if you’ve been refused for car finance in the past for bad credit reasons. We’ve written here on how bad credit can affect an application for car finance. In this guide we’ll explore ways to improve your credit score and get a better chance at getting the car finance you want.
This article at a glance
Understand what a credit score is
Why and how to find out about your credit file and score
How to improve credit score – quick wins
How to improve credit score - longer term ways
Understand What Your Credit Score means
Your credit score is created from information held in your credit report. The exact score required can differ between lenders, and sometimes even between different loan products from the same lender, depending on the criteria they use when deciding whether you’re the kind of customer that’s right for that loan.
The information held on your credit report is used to decide:
- Whether the lender wants to lend to you
- How much they’ll lend to you
- How much interest you’ll have to pay, which will impact how much you pay each month
The most recent information on your file will be deemed the most important, as lenders will be most interested in your current financial situation. Lenders might be less likely to lend to you if they consider you a higher risk – and this might be because in the past you’ve made late payments, or have shown you’ve not always been able to pay back everything you owe.
It’s up to the lender which credit reference they prefer to use. The three credit reference agencies in the UK all have slightly different scoring systems, and they are:
Experian – whose scoring system is 0-999
Equifax – scores range from 0-700
TransUnion – their scores range from 0-710
What’s a good credit rating score?
Each agency has a different number for their minimum good credit rating score:
- A good Experian score starts at 700, with 800 considered excellent.
- With Equifax it is 660 and above
- And for TransUnion it’s 604-627
Certain lenders will have different criteria for the scores they’re looking for. And lenders offering loans to those with lower credit scores often tend to charge higher interest rates, and can sometimes insist on those with a particularly poor credit history to take out a secured loan, where usually a property is put up as security against the loan.
Find out about your credit file and score
Checking your credit report is in good shape is totally free and is an important step if you want to get a mortgage, credit card, or loan. Here's how to check:
There are three credit reference agencies, Equifax, Experian and TransUnion, and they all hold information on you which lenders use. Sometimes people find errors on their files, and even what might seem as minor errors can cause problems, so it's important you check through your credit report. Check for:
- Addresses – making sure every account/loan etc. listed has your current address attached to it.
- Any unfair defaults on there – raise your concern about these directly with the credit reference agency.
- Joint accounts listed – if you no longer have joint accounts with someone, make sure you financially un-link by having these shown as closed on your credit file.
Credit and store cards you don’t use – cancel any unused credit and store cards you can, as these can count against you.
How to improve your credit score: Quick wins
Some aspects of your credit file can take years to see improvements on. But there are some quick wins to be had – and changes you can make immediately to have a positive impact.
- Make sure you’re on the electoral roll – and if you aren’t, then register as soon as possible. It’s not compulsory to vote, but having your details on the electoral roll allows lenders to verify your identity and address easily.
- Dispute any errors online – in days gone by you had to write letters to the credit bureaus if you wanted to dispute errors. Services like Credit Karma let you do it online. Certain factors weigh more heavily on your credit score than others, so pay attention to them first.
- Dispute late payments – for instance, your mortgage lender may report that a payment was late that was paid on time. You can dispute late payments, whether in accounts that are current or accounts that have been closed, the same way you dispute derogatory marks.
- Increase your credit limits – another factor that impacts your credit score is credit card utilization – meaning your ratio of available credit to the credit being used. Generally speaking carrying a balance of more than 50 percent of your available credit will have a negative effect on your score.
If you’ve not found out the information you need here, please take a look at the rest of our Help & Advice section or talk to one of our Customer Advisors today by using our Online Chat. If you’re getting overwhelmed with all the car finance jargon you come across throughout the process, take a browse of this post which reveals all. Once you’ve got your finance in place, we’ve got lots of advice on choosing your next set of wheels too.
If you’re ready to apply for car finance online, you can do so today.
Ten Top Tips for Improve Credit Score
1. Check for any errors on your credit file
2. Get your names on some bills if it isn’t already
3. Be aware of fraud – as this can impact your score
4. Make sure you keep on top of the overall view of your finances
5. Pay your bills on time
6. Use a broker for advice
7. End any negative financial connections with other
8. Don’t apply for too much new credit at once
9. Check you’re on the electoral roll
10. Pinpoint what you need to do to improve your credit score – draw up a plan – stick to it!