How to improve your credit score

Lenders and other organisations use information from credit agencies when deciding whether to lend you money, offer you credit, a contract or an account.

Credit agencies rate or score your ability to repay a loan based on your credit history.

Your credit rating will be low if:

• You have not registered to vote at your current address
• You have no credit cards, loans or other contracts
• You have missed or have outstanding payments on cards or loans
• You have CCJs against you or if you are bankrupt
• You have been rejected for 2 or more loan applications in the last 6 months

What is a credit score

Each lender scores you differently when deciding whether to approve an application but the information they use is similar.

Lenders look at previous dealings you have had with the company, which gives them an idea of your financial behaviour.

They also use information about you provided by companies known as ‘credit reference agencies: Experian, Equifax and Callcredit.

Use credit services to rebuild your credit score

Even if you have a bad credit rating, including CCJs, you can still qualify for loans and cards.

You can apply for the Capital One Classic Card if you're over 18, are registered to vote and have some history of managing your credit, even if you have had CCJs or defaults in the past.

You may also qualify for a Vanquis Card if you have proof of address, are on the electoral role, are not bankrupt and you are over 18 years old.

Use these cards once or twice a month to pay for things such as weekly shopping or filling up your car with petrol.

Pay them off at least 2 weeks before payment is due. If you use these cards without incurring charges or penalties, it will help you to rebuild your credit rating.

Payday Loans improve your credit rating

Payday loans companies pass on your information to lenders who credit check your application with credit reference agencies.

When you have been approved for a loan this will be added to the information credit agencies hold about you.

Lenders also report when you repay an existing payday loan to the credit reference agency, so they will know you have repaid your loan.

This will help rebuild your credit rating as it will show that you have taken a loan and repaid it in full and on time.

Make sure you only borrow what you can repay. It is important to remember that late payments and missed payments have a negative impact on your credit rating.

Contact your lender in advance if you think there may be a problem repaying your loan on your payday and they should be able to review your payment plan.