How to fix your credit score: 7 top tips

Getting finance with bad credit is possible, but there could be a better option. Due to the additional risk you bring to the table with a low credit score, you won’t have as many lenders competing for your business, and the rates you’re offered will reflect this.

But you don’t have to settle—use these 7 tips to work towards a good credit score, so that you can secure the rate you deserve. Alternatively, speaking with a lending expert at Valiant can help you identify your finance options through a soft check, without impacting your credit score whatsoever.

What exactly influences your credit score?

Making a late payment, having incorrect details on file, and applying for credit too many times can lead to a decrease in your credit score. If you’ve declared bankruptcy or defaulted on a loan, this is likely to have an even bigger impact.

Essentially, lenders want to see good debt on file, and good debt only. Good debt includes student loans and mortgages—signs that you’re making positive life choices. Bad credit, on the other hand, looks like multiple loans and credit cards, especially if they’re taken out around the same time.

Applying for finance repeatedly in a short space of time can signal financial trouble, and lenders could assume you’re struggling to make ends meet.

Tips for improving your credit score

It won’t happen overnight, but you can definitely turn things around and achieve a healthy credit score. Once you’ve improved your score, you can then look into your refinancing options for existing debt or take out a new facility when the timing makes more sense.

1. Pay on time

Paying off existing debt on time is the best thing you can do for your credit score. Missing even a single payment can have an impact, and will be recorded on file. If you continue down this road, repeatedly missing payments, you could run the risk of default.

Making consistent and timely repayments, on the other hand, shows that you’re financially responsible. Consider setting up a direct debit arrangement so that you have one less thing to worry about.

It’s also worth noting with the introduction of positive credit reporting (also known as comprehensive credit reporting), lenders and financial institutions get a more accurate sense of your creditworthiness. It’s not just the negatives that are recorded on file—positive credit behaviour, like paying existing debts on time, will help to lift your score as well.

This gives you the opportunity to make a positive impression rather than being judged only when things go belly up.

2. Diversify your credit

Getting the balance right between having enough credit and not too much is important not only for your business, but for your credit score as well.

For example, paying off student debt, a mortgage, and a credit card shows you can handle credit reliability (assuming you’re paying your debt off without trouble) and manage different types of payment systems.

A more diverse range of loan products makes it easier for lenders to understand where money is going as well. But you don’t want to overdo it—only take out what you need and can handle.

3. Think before you enquire

Less is more. Too many loans or credit enquiries can be a red flag for lenders, especially if they’re taken out in one hit. Lenders might question your creditworthiness and quickly come to the conclusion that you’re struggling to manage existing debt.

Keep credit utilisation under 30% (10% is even better) as you don’t want lenders to feel that you’re dependent on credit.

4. Check for mistakes

Your credit file houses information like your name and address, current debt, credit enquiries, employment information, and previous court appearances. If something seems off, even if it’s as simple as an incorrect address or misspelling of your name, it’s important to address it.

If left unresolved, an innocent error could hinder your credit score over time, so it’s important to check your details regularly and make sure they’re correct.

If you do notice an incorrect detail on file, contact the credit reporting agency to let them know, as well as the information provider (that is, the company giving incorrect information to your credit reporting agency). Alert them as soon as possible, preferably in writing, to avoid the error causing any future or further damage to your credit.

5. Stay put

Lenders are more inclined to offer funding to business owners who can prove their stability. Moving from property to property or having inconsistent income isn’t favourable.

If you’ve been at your property for a number of years, this is a green flag that shows you’re in a financially stable place. It also suggests that you’re comfortable making commitments, and more importantly, keeping them.

6. No credit history? Stick it out

If your credit file is fairly new or you’ve never applied for finance, you might be surprised to find your credit score isn’t considered ‘excellent’. Don’t worry—this is completely normal.

The longer your credit history, the better your score tends to be. This is because having some debt (and successfully paying it off on time) builds trust, which in turn can boost your score. It’s a bit of a catch-22, but a little healthy debt is considered better than none.

7. Enquire through Valiant

If you’re looking to take out finance, it’s a good idea to use our free loan finder before making any enquiries, even if you end up applying directly through a bank.

That’s because Valiant carries out a soft check, meaning we can determine your eligibility for finance before you go ahead with an application. This gives you the freedom to explore your options free of consequences before making a decision, and find out where you stand with lenders.

Our loan finder also makes it easy to get free, no-obligation quotes from 90+ lenders, rather than enquiring with one lender at a time.

We hope you found our top tips for improving your credit score helpful, and if you have any questions about your finance eligibility, feel free to get in touch with an expert.