How to check and improve your credit rating

Author photo

By in Student Banking, Student Budgeting. Updated November 2016.

Confused or concerned about your credit rating (and still not really sure what it is)? We’ve got everything you need to know plus tips to improve your score!

credit score scale
There tends to be a whole lot of confusion involved when it comes to credit ratings, and to be honest, that’s really not surprising.

The main issue with the credit rating system is that there’s no definite methodology in calculating a person’s credit score, and how credit companies choose to judge your score varies from one business to the next.

Also, as there are so many rules about disclosing personal data, trying to get answers to queries about your credit rating can be more difficult than drawing blood from a stone.

What we do know, however, is that having a credit rating is really important if you ever want to apply for anything grown up and scary like a mortgage, or a loan to start up your own business.

This might seem like a bit far off in the horizon of your future plans to be thinking about now, but the key to building a great credit score is to get started on improving it nice and early!

We’re here to fill you in on exactly why your credit rating matters so much, and how to get working on improving it.

What’s a credit rating?

credit reportEssentially, a credit rating is a kind of grading system used by banks and lenders to work out how much money you should be given when you apply for a credit card, overdraft, mortgage and other credit products (or whether you should be given anything at all).

Banks and lenders basically use the evidence they can scrape together from your credit report regarding how good you’ve been with your money in the past, to determine how well you’ll look after your pennies in the future.

For example, if you’re applying for a student bank account, your credit rating might determine whether or not you’re allowed the highest amount of interest-free overdraft.

Or, if you feel the need to apply for a student credit card, your credit score will help the bank decide what the limit on your card should be (if you’re not so good with money, they’ll keep the limit down to avoid having to chase you up for payments).

Example credit report

Example credit report

Despite what you might’ve been told in the past, the myth that there exists some sort of credit score ‘blacklist’ that prevents people from taking out loans cause they’ve got some crazy outstanding debt hidden away totally isn’t true, so don’t sweat!

Your credit record also isn’t held on a single database, but with three different major credit companies: Callcredit, Experian and Equifax. This means that your score could be higher according to one company’s records than it is to another.

Your credit rating is just one factor in a bank’s decision, meaning they might still give you a great deal on a mortgage despite your credit rating being poor, just because you’ve had a good history with them personally.

However, whilst there are lots of factors involved, you can help yourself just by being aware that your credit score exists, and try to nurse it to good health to keep your future lending opportunities as wide open as possible.

What do I need a credit rating for?

credit cardYou need a credit rating in order to give banks and lenders a better picture of you in relation to how you handle your money.

In this sense, it’s fair to say that having no credit history at all is just as bad as having a poor credit history.

If you were a bank, would you feel more confident lending thousands of pounds to someone who has no record of ever having paid their bills before than you would someone who had missed a few payments?

The risk involved here for banks is just as high to lend to anyone who doesn’t have a credit score, which is why banks simply won’t shell out to anyone without one.

As mentioned earlier, you need a good credit rating to apply for a mortgage or loan, but you also need it if you ever want a credit card (ironically, since you might need a credit card to build up your credit rating in the first place) or even if you want to sign yourself up to an expensive phone contact (which you won’t be allowed if your rating isn’t up to scratch).

Your credit rating can also affect how expensive your monthly home or car insurance payments are, so it’s definitely worth looking into!

How are credit scores calculated?

Black calculator and bookNobody knows the exact calculation used to determine your credit rating, and different companies apparently use a variety of factors when grading you. This is why it’s best to check with all three (see companies below) in order to give yourself an accurate figure.

However, what we can tell you for sure is which factors are taken into account and which definitely won’t be included in your report…

What they will check:

  • Past bank dealings
  • Bill payments (if you’re late or ever forget to pay your bills)
  • Mobile phone contract payments
  • Credit card history
  • Loan history
  • Building society history.

What they won’t check:

  • Student loan repayments – contrary to popular belief, student loans don’t have any influence on your credit score
  • Parking fines (phew!)
  • Whether you’ve checked up on your credit rating
  • What your salary is (although the bank will check this)
  • Savings accounts (only your current accounts are included)
  • Gambling activity
  • Council tax payments (these are kept separate from credit scores
  • Criminal records you might have.

3 ways to check your credit rating for free

creditscoreIf you’re concerned about your credit score, or are even just curious to know what yours looks like, then it is possible to check your records with all three major credit agencies for free on a trial basis.

How it works

The credit referencing agencies tend to offer a free trial of a few weeks when you sign up.

Once you’ve received your free credit report, go right ahead and cancel your subscription with them (make sure you remember to do this!).

  1. Experian

    experianExperian is the UK’s biggest credit referencing agency. *Source: Hitwise, June 2016.

    Your Experian Credit score can now be accessed free for life through their new CreditMatcher.

    If you’re keen to delve further into your actual report as well as receive other bonuses you can sign up to their other service, called CreditExpert, that comes with a £14.99 monthly fee.

    Check Experian »

  2. Equifax

    equifaxThis is the second largest agency, and the Equifax free trial is also 30-days long.

    Thereafter, the charge is £14.95 for your credit score and report.

    If you don’t cancel within the 30-day trial period, you’ll be charged the monthly fee.

    To cancel your subscription, call 0800 090 2219 (free) with your reference number to hand.

    Check Equifax (free trial) »

  3. Callcredit

    cig logo copyThis agency is little used by banks and other lenders, but you can check it for free through Noddle so it’s worth giving this one a bash to see how your score stands.

    Just be aware they might also try to sign you up for financial products you don’t need, so get your nonsense filter on!

    Remember that each referencing agency will grade your score differently, so it’s best to check all three to get a good overview of your situation.

    Check Callcredit (free) »

 6 ways to improve your credit rating

bad creditAfter checking your credit reports with all three companies, it is possible that you might be a bit worried or dissatisfied with the score you’ve received.

If this is the case, don’t worry – you can still do something about it!

Here are our top six tips for improving your credit rating. Remember that your score won’t suddenly shoot up overnight, but just being aware of the risks and knowing the steps you can take to give your rating that boost it needs will work wonders in the long run!

  1. Make sure everything’s correct

    If you don’t agree with something in any of your credit checks, or you’ve noticed any obvious errors, then you’ll need to make sure something’s done about it ASAP.

    You can sort this by calling up the credit company themselves and asking if they’ll look into it. They may require you to contact the company that has given them the incorrect data (e.g. your mobile phone company or your bank) to amend it.

  2. Get a credit card; use for one thing only

    The most straightforward way to improve your credit rating is by taking out a credit card and employing some serious military-strength will power with it!

    The best way to ensure this is by designating a specific payment purpose for that credit card and using it for this purpose only (so no last minute holiday bookings that you will “definitely pay back at some point,” ya hear?).

    For example, if you use your credit card for your weekly food shop, you’re likely to be spending a similar amount each month. You can then set up a minimum monthly repayment by direct debit so that the card is paid off in instalments each month – the fact that you’ve been offered credit (money) that you’re free to spend and have displayed financial discipline by choosing to only spend a regular, similar amount each month will work in your favour.

    For more details on credit cards read our full guide on credit cards for students.

  3. Pay all your bills on time

    The most simple way to improve your credit score is to make sure that you pay all of your bills on time.

    This includes utility bills, mobile phone contracts, rent and any form of loan repayments (except student loans, of course!).

  4. Get on the electoral roll

    If you aren’t on the electoral roll, it’s unlikely you’ll be accumulating any credit at all. A lot of students fall foul to this one because after moving away from home, registering at a new address can seem like a hassle.

    However, it’s actually super easy to register online (we estimate about 2 minutes of your time) and your credit rating counts on it!

    You’ll find everything you need to know about how to register for the electoral roll on the About My Vote website.

  5. Record your rent payments

    Since March 2016, it’s now possible to arrange for your rent payments to be shown in your credit report. Inventively called ‘The Rental Scheme,’ this is a great option for anyone who’s good at paying their landlord in time and looking for ways to beef up their credit score!

    How it works is that you arrange to start paying your rent through a third party website called the Credit Ladder. Credit Ladder then act as a sort of middle man and pass on your rent to your landlord (as you can imagine, your landlord also needs to consent to this first!).

    Every time you pay Credit Ladder, they record how punctual you are with the payment, whether you paid the right amount, and stores this data to be picked up in your credit report. Pretty neat!

  6. Space out applications

    Every time you apply for what’s called a ‘credit product’ such as a mobile phone contract or a new credit card, it leaves a ‘footprint’ on your credit report. This is because banks want to be weary of people who apply for credit products and get rejected, or even those who purposely take out credit products in order to get a credit rating.

    The key therefore is to make sure you spread out your applications as much as possible and only apply if you really need to. If you are denied credit at any point, wait at least 30 days before reapplying.

    Try to prioritise! Your mobile contract is likely to be a bit more important than taking out a credit card to pay for that InterRailing holiday you and your friends have been planning. Apply for whichever is most pressing first, so that being rejected for something small doesn’t get in the way of your application for the more important stuff.

4 things to watch out for

scaredcatFinally – there are a few small slip-ups to be aware of that might not seem like they could be damaging to your credit rating, but are. It’s all part of the…err…fun, right?

  1. Never use your credit card to withdraw cash at an ATM. Not only are interest rates on this completely ridiculous, but this will show up on your credit report – making it look like you’ve had to use a credit card as last resort due to seriously bad budgeting.
  2. Never take out a payday loan! Of course, we already know how terrible these loans are, but these loans are not just bad for you bank balance. Just having them appear in your credit report looks terrible to lenders.
  3. Never pay out for what’s advertised as a ‘credit repair service’. Essentially, there’s nothing that these companies can do that will help you (except for advise you on all of the above points, which we’ve just given you for free). Don’t waste your money on these guys.
  4. Don’t hold on to any old store cards you have but aren’t using. If you’re seen to have heaps of credit sitting but not being used, this can be damaging too.

Hopefully we’ve shed at least a tiny bit of light on the complex mystery otherwise known as the world of credit reporting! We know this stuff can be a bit of a headache, but you’ll get there in the end!

The trick is just to try and show the banks that you know to look after your bills, and the banks will look after you (in theory).

Let us know if you have any questions, or if you think we’ve missed any info out!

Share this page :)



Leave a comment



Leave a comment without Facebook