Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk

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  • The beginner’s guide to credit: Part 2 – Maintaining your UK credit score

    Keeping you credit score healthy is like maintaining a healthy body – to stay at the top of your game you need to build a good routine that will not only keep you financially fit, but help you feel strong and confident at the same time.

    In Part I we discussed how you can build your credit if you have recently moved to the UK. In Part II we will discuss how you can nourish it.

    Refrain from applying for a credit when not in need

    A hard search is carried out for each full credit application you make. It is only performed with your permission, but it leaves behind a mark on your credit history and will be visible to other creditors. Making multiple applications within a short space of time can damage your score. According to the UK credit bureau Experian, each hard search can decrease your credit score by a rough average of 5 – 10 points, depending on the initial strength of your credit score.

    It is advisable to avoid applying for credit frequently in a short space of time. Experian advises to wait around three months in between each application. To maintain your credit score, only make an application when you really need to.

    Old is gold

    The age of your credit history can account for up to 15 percent of your credit score, according to the money advice website, CNBC Select. So, the longer the better. If you want to close some of your credit accounts, you should target the newest and keep the older ones (provided they offer value). This shows the credit agencies that you have a longer history of borrowing and paying back.

    Set payment reminders

    Observe your payment dates and set up reminders in advance to avoid any missed payments. Making consistent payments will help maintain and can raise your credit score in just a few months.

    All debts are equivalent when it comes to making regular repayments

    CNBC reports that a person’s payment history comprises up to 35 percent of their credit score. Therefore, a missed payment can cause a big drop in your score and might mean you have to pay extra charges.

    If you think you might miss a payment, contact your provider straight away and let them know. Making constantly low payments can impact your score and reduce your chances of getting a loan in the future.

    Creditors can help and guide you

    If you are in financially difficult situation and believe you’ll have trouble paying your bills, contact your credit provider as soon as you can. It is in their interest to help you and they can usually be flexible about repayment plans.

    Talking honestly to your creditors will help them understand your financial situation and avoid misunderstandings about your payment behaviour. They might be able to provide you with appropriate solutions to suit your situation and can suggest alternative payment arrangements.

    Remember, having a bad credit history is not the same as being in financial difficulty. If you think you are in financial difficulty or are finding it difficult to pay your bills on time you should seek an alternative solution. To get debt advice information, we advise seeking independent advice from an impartial service like Citizens Advice or a qualified Financial Advisor.

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