How can I Improve my Credit Score?
What is a Credit Score?
Credit score! We hear the words often, but do we know how it works?
In short, your credit score is measured based on any financial history that’s available about you. Typically, lines of credit you’ve taken (for example, 0% finance on a laptop) or a mobile phone contract. Or more important things like existing car finance or a mortgage. Credit history is usually over the previous six years: so if you’ve got a less-than-stellar one, you’re stuck for a while.
The higher your credit score, the more likely you’ll get approval for car finance. Lenders will see a decent credit score as responsible money management and make available lower interest rates.
If you have a poor credit score, don’t fret: there are car finance lenders who are willing to offer you a decent deal. However, you’ll likely have to have a good source of income and possibly a significant deposit or part exchange.
We can also help people who may have difficulty proving their income as self-employed, part-time workers or retired.
Younger drivers and people who have not taken out any credit recently (six years) looking for car finance might be concerned about credit score or lack of one! Unfortunately, a non-existent credit score can work against you almost as much as a bad one.
You’ll likely have a good credit score by paying your debts on time. However, missed payments or defaults on a finance contract can lead to any of the following:
- Debt Management Plan (DMP) – an informal arrangement with your creditors. (Does not protect you from CCJs).
- Individual Voluntary Arrangement (IVA) or a Trust Deed in Scotland. (Protects you from any CCJs).
- County Court Judgements (CCJs).
- Declared bankrupt.
Each of the above will harm your credit score.
How to improve your credit score
It takes effort to improve your credit if you own a less-than-perfect credit score. Take out more lines of credit, and pay them off responsibly. For instance, try getting a credit card and paying for your shopping using it. However, you must set up a direct debit to pay it off monthly! Acts like this can help improve your credit score without tying you into an extended credit agreement.
Ensure you don’t miss any payments. If a direct debit or standing order is unpaid, rectify it as soon as possible, and you should avoid a bad mark on your credit report.
Nothing is easier and more profitable than getting your name and address on the Electrol Register – that alone will likely boost your credit score.
Another thing to avoid is using too much of your available credit. Suppose you have two credit cards with a total of £4000 credit. Lenders won’t want to see you have more than 50% balance. Maxing them out is a no-no if you wish to take out further credit like a car finance loan. The other pinch point lenders look out for is cash withdrawals on these cards, which is a sign that you are struggling financially.
With such a large panel of lenders, car finance deals are available to even drivers with not-so-good credit ratings. Some of our lenders offer finance to those with bad credit, including those with CCJs, Defaults, or who have been refused car finance elsewhere.
To check your credit score, use one of three Credit Reference Agencies Experian, Equafax or TransUnion.
See how much you can afford to borrow using our Car Finance Calculator. Apply, and once you have approval, select a vehicle from any reputable dealer.