A Journey To Better Credit
Taking the first step to improve your credit score is a positive choice, and it’s the start of a journey toward greater financial freedom. Understanding your credit score is the first step to improving it, and it’s simpler than you might think.
The information in this article is provided for general educational purposes only and should not be taken as financial advice. Everyone’s financial situation is different, and you should always consider seeking guidance from a qualified independent financial adviser or free, impartial organisations such as MoneyHelper or Citizens Advice before making decisions about credit or borrowing
What Are Credit Scores and a Credit Report?
Think of your credit score as a financial snapshot. It’s a number that helps lenders understand how you’ve managed credit in the past. A credit rating is another term for this, and a higher score often means you’re more likely to be approved when you want to borrow money for things like loans, credit cards, or mortgages.
Your score is calculated using the information in your credit report (also known as your credit file). This report is a detailed file of your financial life. Credit reference agencies gather information from lenders, banks, and other service providers to build your credit file. The three main credit reference agencies in the UK, Experian, Equifax, and TransUnion each hold a credit file on you. Each lender also has its own system for evaluating creditworthiness, so your experience may vary between lenders. It’s not a grade on your worth; it’s simply a tool that financial companies use. The good news is that it’s not fixed. You have the power to change it.
Your Action Plan to Improve Your Credit Score
Improving your score doesn’t happen overnight, but with a few consistent habits, you can make real progress.
1. Know Where You Stand
The first step is to check your full credit report. You can check your full credit report for free in the Updraft app. It gives you an instant view of your credit score and credit history, so you can spot what’s helping or hurting your score. Look through it to make sure all the information, including your address records, is current. If you spot any errors, you can raise a dispute with the credit reference agency to have them corrected, or you can raise a dispute to get any inaccuracies corrected.
You can also sign up for credit alerts to view credit alerts and monitor any changes. It’s important to know that only you can see certain information on your report, like credit searches. Registering on the electoral register (also known as the electoral roll) at your same address is a simple way to help lenders confirm your identity and can give your score a boost.
“Your credit score doesn’t define who you are, but it can unlock opportunities for your future. We started Updraft because we believe people deserve to be back in the driver’s seat of their finances. When you can see your money clearly and manage it simply, we’re here to help you turn that credit score from something that stresses you out into something that builds real financial freedom.”
Aseem Munshi
Updraft Founder & CEO
2. Build a Positive Credit History
Your credit history is a record of how you’ve managed borrowing over the years. Lenders want to see a track record of responsible behaviour.
Making Regular Payments
Consistently making regular payments on time is one of the most important things you can do. This applies to all credit accounts, including your mobile phone contract and other utility bills, as many service providers check your credit file. Not missing payments is crucial, as even one slip-up can have an impact. Paying bills on time demonstrates financial responsibility and positively impacts your credit report.
Avoid Defaults
If you don’t pay what you owe, you risk late or defaulted payments being added to your record. When you manage accounts carefully, lenders will not have to report arrears. These negative marks can seriously affect your future credit eligibility. County court judgements and individual voluntary agreements can be recorded on your credit file and significantly impact your score. These can remain on your credit report for up to six years. Contact early lenders or seek support as soon as financial difficulties arise to avoid more serious consequences.
Manage Different Types of Credit
Having a mix of credit options shows that you can handle different financial commitments. This could include unsecured credit cards and secured lending like a mortgage. Seeing a variety of well-managed credit accounts shows lenders that you are a reliable borrower.
Understand Financial Links
Be aware that joint accounts create a financial link between you and the joint account holders. Being a joint account holder creates a financial link that can affect your credit record. Their financial behaviour can affect your credit record. Even utility bills can impact your credit record.
Keep Long-Term Accounts
The average age of your accounts matters. Keeping the same accounts open for longer can demonstrate stability.
Manage Bank Accounts Responsibly
Managing your bank accounts responsibly is important. Carefully managing an arranged overdraft can positively impact your credit score. Your credit habits can also affect your loan eligibility.
Manage Your Credit Limits
Credit limits are the maximum amount you can borrow on a credit account. How you manage them is key.
Stay Within Your Limits
Always stay within your agreed credit limits. Exceeding them is a red flag for lenders.
Keep Utilisation Low
Try to use less than 30% of your available credit. For example, if you have a £2,000 limit, try to keep your balance below £600. Lenders see this as a sign that you are not over-reliant on credit. Responsible use may even lead to offers of higher credit limits, which can further improve your utilisation ratio.
Pay Down Balances
Focus on paying off debit balances on your active credit accounts as quickly as you can, rather than just making minimum payments.
3. Be Smart with Applications
When you apply for credit, it leaves a mark on your file. Making too many credit applications in a short time can suggest to lenders that you are in financial difficulties, making them less likely to approve you. Avoid applying for credit regularly, as frequent applications can negatively impact your score. If you are struggling with financial commitments, consider seeking help from third party organisations for independent support and assistance.
Credit Limit Considerations: How Your Limits Shape Your Score
Your credit limits are more than just numbers, they’re a key part of how your credit score is calculated. Credit reference agencies look at how much of your available credit you’re using, known as your credit utilisation ratio. Keeping this ratio low (ideally below 30%) shows that you’re managing your credit responsibly and aren’t overly reliant on borrowing. This can help improve your credit score over time and signal to lenders that you’re a low risk applicant.
It’s a good idea to regularly review your credit limits and adjust them if needed. While having higher credit limits can sometimes be helpful, lenders may see very high limits as a potential risk if they think you might overspend. On the other hand, lower credit limits can demonstrate that you borrow within your means, which can positively affect your credit history.
Remember, credit limits are just one piece of the puzzle. How you use and manage your credit accounts, make payments, and handle your overall credit history all play a role in building a good credit score. By keeping your credit utilisation in check and managing your limits wisely, you’ll be in a stronger position to improve your credit score and access better credit options in the future.
How Updraft Can Support You
Juggling multiple credit card payments can be stressful. An Updraft Pay Off Loan could help you consolidate these into a single, manageable monthly payment (subject to status & affordability. When consolidating existing borrowing, you may extend the term of your debt and increase the total amount you repay).
This simplifies your financial commitments, makes it easier to stay on top of your outgoings, and can help you take control of your bank account finances, all while potentially lowering the interest you pay. With an Updraft loan, you can take control of your credit card debt. It’s a straightforward way to manage what you owe and take a positive step towards building a good credit history.
You’ve Got This
Improving your credit score is a journey of small, positive steps. Every on-time payment and every smart decision contributes to a healthier financial future. You’re already on the right path by reading this, and with the right tools and support, you can build the financial confidence you deserve.
Final Thought
Want to take control of your money? If you’re looking to consolidate credit card debt and cut down on high interest, download the Updraft app today.
Representative example
26.5% APR representative based on a loan amount of £10,000 over 60 months at a fixed interest rate of 21.9% p.a. This would give a monthly repayment cost of £286.65 per month, with a total cost of credit of £7,198.74 (includes loan fee of £400) and a total amount repayable of £17,198.74.
All figures are representative, the rate you are offered will depend on an assessment of credit worthiness and affordability. Terms and conditions apply.
Updraft Awards & Recognition
Recognised for helping UK borrowers take control of debt.
