May 18, 2022

REVEALED: Top tips to improve your credit score in 2022

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The start of a new year brings reflection and resolutions, and with Christmas spending at the forefront of everyone’s mind in January, the experts at Zuto have put together 10 tips to help you improve your credit score at during the new year.

Having a good credit score can help you improve your chances of being accepted for credit and getting the best rates.

From getting on the voters roll to canceling unused credit cards, there are short-term and long-term things you can do to help boost your credit score.

1. Register on the electoral lists

Starting with the simplest step of all, the voters list is a list of names and addresses of people registered to vote in the UK. Your voter information is recorded on your credit file when you register to vote, which allows lenders to confirm your name and address.

2. Make routine payments on time

Paying your current credit card, loan, and utility bills on time will show lenders that you are reliable and able to handle your credit responsibilities. Having accounts for a long time is also likely to improve your score.

3. Avoid the limit on your credit card

Try to keep your credit utilization rate at around 30%. The credit utilization rate is the percentage of credit you are using out of your credit allowance.

For example, if your credit limit is £1000 and you use £500, your credit usage is 50%. Having a lower percentage is considered an advantage for lenders.

4. Minimize credit inquiries

Try to avoid applying for credit multiple times in a short period of time, as this makes lenders think you are relying too much on credit.

Most complete applications, regardless of amount, will appear as a hard credit check, which means lenders will be able to see it on your report.

5. Ideally favor soft searches

When applying for credit, first favor a flexible credit search. Rigorous searches show up on credit scores, while soft searches do not. This means that any inquiries you make will not be seen by potential lenders.

Quote searches, otherwise known as soft searches, do not affect your credit score.

6. Use your overdraft sparingly

An overdraft appears on a credit report as a debt. However, if the lenders are able to see that you can meet the agreed limit, you will be considered a reliable borrower.

7. Cancel unused credit and store cards

Although lenders like to see well-managed older accounts, having an account that is no longer in use can impact your credit score. Having access to too much available credit and not using it can actually hinder some applicants. So, consider canceling accounts you haven’t used for a long time.

8. Avoid payday loans

Although short-term loans can be tempting, try to avoid them whenever possible as the interest can be high and they can get very expensive.

9. Unbundle financially

If you’re ending a relationship with someone you were financially connected to and they had bad credit, you don’t want their bad score to affect yours. You can contact the credit reporting agencies and request a notice of dissociation. This would mean that you would close joint accounts and repay joint loans.

10. Check your credit report annually

Try to check your credit report annually or before reapplying. They contain masses of data and you want to make sure there are no errors that need to be corrected as this could affect a future application.

Jo Robinson, Director of Lenders, said: “The Chancellor’s decision to investigate credit card and loan APRs comes at a welcome time during the current difficult financial times that everyone is experiencing. People may have been hesitant to apply for credit for fear of hurting their credit score if they were denied, thus forcing them to accept the higher rate and have to pay more.

The introduction of soft searches in the auto finance industry, along with increased transparency through real rates and guaranteed pre-approvals will surely have a positive effect on consumers who will be able to check their eligibility before committing and avoid possibly damaging their credit ratings.