How to improve your credit score for loan applications

You can use an online credit reference agency such as Equifax, Experian or Credit Karma to check your credit file for free. On your credit file, you will …

Applying for loans can be stressful, especially if you have a low credit score. Whether you’re applying for car finance, a mortgage, credit card, personal loan or any other type of credit, you’ll usually need a good credit score to be accepted for a loan.

If you’ve ever been refused car finance in the past or any other type of loan, you’ll know how disheartening it can be. Your best chance of being accepted for different types of loans is to increase your credit score. There are a few easy ways in which you can increase your credit score.

Check your credit file

The first thing you should do before you apply for any sort of loan is check your credit file. Before you can start rebuilding your credit score you should know where you stand. It can also be surprising if you don’t know how good or bad your credit is. You can use an online credit reference agency such as Equifax, Experian or Credit Karma to check your credit file for free.

On your credit file, you will get access to a credit score, personal details, a list of your credit accounts, any financial partners, public record information such as County Court Judgements, electoral roll information and previous/current addresses. All of this information can be viewed by yourself and is sometimes available to some potential lenders, depending on the type of search they provide on your credit file.

Improve your credit score

Register on the electoral roll

Many people don’t know that this is an easy way to increase your credit score. In the UK, the electoral roll is an official list of people in a certain area who are entitled to vote in an election. Even if you don’t care about voting, being registered on the electoral roll can increase your credit score. This information is provided on your credit file and lenders use this info to very that you are who you say you are and your current address. Lenders tend to favour people who don’t move around as much so this can strengthen your applications.

Pay all your bills on time

This may seem simple, but it can be quite hard if you have had trouble in the past making repayments on time. However, even a few months’ worth off meeting all your financial deadlines can increase your credit score. Your credit score is all about future predictions, so showing evidence to potential lenders that you are a responsible borrower can work in your favour. If you struggle making repayments, why not set up direct debits for the day after you get paid or use payment reminders on your phone or calendar? You should also try to make your payments in full as making the minimum payment requested on credit cards or store cards may indicate to lenders that you are struggling to handle your current credit.

Check your file for mistakes

As mentioned, the first thing you should do is check your credit file. When you check your file, you should make sure all your information listed is accurate and up to date. Even an incorrect address history or spelling mistake can affect your credit score. You should also look for any fraudulent activity. If you suspect any fraudulent activity, you should contact your credit reference agency as soon as possible. Your identity could be used to build up debt which you will be liable for. You should also ask the credit reference agency to make a note of any corrections on your credit file to make it clear that the activity was not your fault.

Check for any financial partners

You can take out joint credit with other trusted partners to strengthen your credit applications. For example, many people who are search for bad credit car finance many be worried about being accepted so providing a joint application can increase your chances of being approved. If you have taken out credit in the past with someone as a joint application, you may still be financially linked. If you no longer have an open application with someone else, it’s best to disassociate yourself. If your financial partner has credit difficulties, this can also drag your score down too. You should contact the credit reference agency to make a note of the dissociations on your credit file.

Keep your credit utilisation low

When you take out credit, you will have a credit utilisation which is the amount of available credit which you actually use. For example, if your available credit is £1,000 and you’ve used £500, this means your credit utilisation ration is 50% Usually using less of your available credit can be seen a positive thing to lenders. As a general rule of thumb, you should only use around 30% of your available credit. This indicates to lenders that you are responsible with the money you have borrowed.

Don’t make multiple credit applications

When you apply for any sort of credit, potential lenders will usually check your credit file. If you are shopping around for the best loans, it’s best to stick to companies who only provide a soft search on your file. A soft search is recorded on your credit file but won’t affect your credit score and isn’t visible to lenders. A hard search however is recorded on your credit file so lenders will be able to see when you have been declined for credit. Multiple hard searched in a short space of time can lower your credit score and affect your chances of being approved for loans.

Consider a credit building card

If you have a low credit score because you have no credit history, you could consider a credit building card. A credit building card is designed for people who have little or no credit and can also help people with bad credit. You can use these cards to make a few payments each month and then pay them back on time and in full, this can provide strong evidence that you are able to make your repayments. However, you should only consider a credit building card if you are confident you can make your payments on time. Never take out a credit building card if you are unsure about repayments as this may result in more debt if you can’t keep on top of your payments.

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Credit Scores, Credit Reports & Credit Check Services Market to Witness Massive Growth …

Experian, Equifax, Trans Union, Identity Guard, IdentityForce, PrivacyGuard, Credit Sesame, MyFICO & Credit Karma. Credit Scores, Credit Reports …

Global Credit Scores, Credit Reports & Credit Check Services study will help you investigate a detailed division of the market by the end user/industry, by best in class product type and by geography with creation, income, utilization, export & import data in these areas, crunching historical data along with primaries and opinion leaders and industry experts interview and estimate with detailed driving factors for forcasted period.

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Top Credit Scores, Credit Reports & Credit Check Services Manufacturers:

Experian, Equifax, Trans Union, Identity Guard, IdentityForce, PrivacyGuard, Credit Sesame, MyFICO & Credit Karma.

Credit Scores, Credit Reports & Credit Check Services Report Focusing By Types:

, Credit Scores, Credit Reports & Credit Check

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Credit Scores, Credit Reports & Credit Check Services Market Outlook, Demand, Key Player and …

‘The primary purpose of the report is to highlight the many important global Credit Scores, Credit Reports & Credit Check Services market dynamics …

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Experian, Equifax, Trans Union, Identity Guard, IdentityForce, PrivacyGuard, Credit Sesame, MyFICO, Credit Karma

Segment by Type:

  • Credit Scores
  • Credit Reports
  • Credit Check

Segments by Application:

  • Private
  • Enterprise

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North America, Asia-Pacific, UK, Europe, Central & South America, Middle East & Africa

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How to read a credit report to find out if you’re in good standing

You may also be able to access free copies of your credit reports if you’ve recently been turned down for financing, and both Credit Karma and Credit …

Your credit reports play an important role in your financial life. Whether you are applying for a loan, auto insurance coverage, or a new apartment, the condition of your credit could either make your life significantly easier or a lot more difficult.

Because your credit matters so much, it’s important to keep a close eye on your credit reports from all three major credit bureaus — Equifax, TransUnion, and Experian— and learn how to read a credit report.

You can claim a free copy of all three of your reports once every 12 months from AnnualCreditReport.com. You may also be able to access free copies of your credit reports if you’ve recently been turned down for financing, and both Credit Karma and Credit Sesame allow you to check your score for free at any time.

By checking your credit often, you’ll be better equipped with the knowledge you need to earn and keep a good credit rating. You’ll also be in a position to respond quickly if any fraud or mistakes appear on your reports. (Unfortunately, it happens.)

How to read a credit report

Most credit reports are broken down into sections that make your information easier to understand and digest. Different reports might display the following sections in different sequences, but as long as you know what to look for in each, you should be able to understand your report regardless of the order in which the sections appear.

Here’s a look at what you might expect to see if you access a standard copy of your own credit report online (aka a consumer disclosure).

1. Personal information

The first part of your credit report is usually the personal information section. It contains details like:

  • Name
  • Present and former addresses
  • Date of birth
  • Social Security number
  • Present and former employers

The information above won’t have an impact on your credit scores, but you still want to make sure it’s accurate. A wrong address, for example, might be a minor mistake. But it could also indicate a bigger problem, like identity theft or a mixed credit file.

2. Accounts

The second section of your credit report typically lists your accounts — both open and closed. This is actually one of the most important sections of your credit report. The information contained here can have a big impact on your credit scores in several ways.

In addition to listing your accounts themselves, this section of your report contains details about how you’ve managed those accounts over time. Those details may include:

  • The date an account was opened and (if applicable) closed
  • Your payment history each month (on-time, 30 days late, 60 days late, etc.)
  • Current balance
  • Credit limit
  • Original loan amount
  • Current status (current, past due, etc.)

Let’s say your report shows a credit card that’s five years old. You’ve never paid late and your balance-to-limit ratio (aka credit utilization rate) is low. That account is likely helping your credit scores. On the other hand, if your report shows a card with habitual late payments and a high balance-to-limit ratio, your scores are probably taking a hit as a result.

3. Collections and public records

Hopefully this section of the credit report will be empty. However, if you’ve had accounts that have been sold or turned over to a collection agency for non-payment, this is the section where they will appear on your report.

A collection account on a credit report should contain the following information:

  • The name of the collection agency
  • The original creditor’s name
  • The balance on the account

Currently the only public records included on credit reports are bankruptcies.

If you do have collection accounts or bankruptcies on your reports, they’re likely having a negative impact on your credit scores. Thankfully, as negative items grow older, any impact on scores lessens over time. Best of all, after seven to 10 years, federal law requires most negative information to be deleted from your credit reports entirely.

4. Inquiries

The final part of your credit report is the inquiry section. It contains a list of who has accessed your credit report in the last 24 months.

“Soft inquiries” occur when you check your own credit and will only appear on a report you pull yourself. They don’t show up on a lender’s credit report.

Hard inquiries,” like those that occur when a lender pulls your credit as part of an application, have the potential to damage your credit scores slightly. However, even though these inquiries may remain on your report for 24 months, they’re only factored into your credit score for 12 months.

Disputing incorrect information

Unfortunately, errors and fraud wind up on credit reports all the time. This is the primary reason why checking your reports frequently is so important. Remember, if you discover information on a credit report that isn’t correct, you have the right to dispute it.

Need help disputing items on your credit report and improving your score? CreditRepair.com can help »

Related coverage from How to Do Everything: Money

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5 best ways to make sure your credit score hasn’t been affected

If you haven’t checked your credit score lately, start with a well-known company like Experian and Credit Karma (full list below). There are several that …
keyboard-enter-laptop-computer7923

Always keep tabs on your credit score.

James Martin/CNET

If you were one of the many people affected by the Capital One data breach or the Equifax data breach, you already know how important it is to check your credit report. Your credit score is an important part of your financial picture — especially when applying for credit cards or loans and making major purchases, like down payments on a new home or vehicle. Being involved in your credit is another way to verify that your identity hasn’t been stolen. Note that looking into your credit score will not affect your credit.

If you haven’t checked your credit score lately, start with a well-known company like Experian and Credit Karma (full list below). There are several that offer a range of services at different prices, including a free online check and free 30-day trial. Keep in mind that some companies require your credit card information, but they typically provide additional services, like insurance against identity theft and flagging suspicious use of your Social Security number.

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So how does a credit score work? Everyone starts out with a FICO score, which is your creditworthiness number that can range from 300 to 850. The higher the number, the better. Some factors that affect your FICO score include “hard inquiries” like applying for credit (your credit is under review); “derogatory marks” like paying a bill late (these can keep your score down); and how much of your total credit you’re using (the less you use, the better). You get a FICO score from the three major US credit bureaus: Experian, TransUnion and Equifax. Here’s how these services break down.

Read: The best identity theft monitoring services for 2019

Experian

  • Free 30-day trial
  • Price: $20 per month
  • Offers tool to help boost your credit score
  • Includes identity theft monitoring
  • Says it will address fraud if your identity or personal information is stolen
  • Shows your FICO scores for all three bureaus (Experian, TransUnion, Equifax)
  • Monitors your credit
experianexperian

Experian credit score checker.

Screenshot by Katie Conner/CNET

Experian (or download the app for iOS or Android) is one of the major credit monitoring services that offers your FICO scores for the three bureaus. Experian can help you boost your FICO score by using utility bills that you’re already paying to apply to your credit. Your new credit scores will immediately take effect.

The company monitors identity theft and conducts daily scans of dark web pages to detect if your information has been stolen. If anything is detected, Experian says its support team will help.

TransUnion

  • $25 per month
  • Includes free identity protection
  • Unlimited score and report access
  • Credit Lock Plus
  • Up to $1,000,000 in ID theft insurance

Also among the top three major credit monitoring services is TransUnion (or download the app for iOS or Android). With TransUnion, you can check your credit score report as often as you’d like to see if your score has changed.

Identity protection is included through Javelin, an identity protection service provider. Your monthly fee includes credit monitoring, instant alerts if someone applies for credit in your name and up to $1,000,000 in ID theft insurance. TransUnion Credit Lock is a service that keeps your credit profile on lockdown until you unseal it. For example, if a criminal applies for credit in your name, the lock will prevent them from stealing your credit information.

transuniontransunion

TransUnion credit score checker.

Screenshot by Katie Conner/CNET

Equifax

  • $5 for a 30-day trial
  • $20 per month
  • Shows your three-bureau FICO scores
  • Includes identity protection
  • Sends alerts about suspicious activities
  • Monitors credit and Social Security number

The third main credit bureau in the US, Equifax (or download the app for iOS), suffered one of the worst data breaches in 2017 affecting more than half of all Americans. Equifax has a three-year plan to earn back your trust. If you were affected by the data breach, you can file a claim and get a free subscription to Equifax or receive a cash payment.

If you’re feeling forgiving, Equifax’s services are on par with competitors. It provides a copy of your Equifax credit report and monitors your credit and Social Security numbers by scanning websites where consumer information has been sold. Equifax also sends alerts about suspicious activities, like someone applying for credit in your name on the other side of the country.

equifaxequifax

Equifax monitors your credit and Social Security number.

Screenshot by Katie Conner/CNET

Read: How the Equifax hack happened, and what still needs to be done

Credit Karma

  • Free
  • Check credit score for free
  • Monitors credit
  • Shows credit factors and how they affect your score

Credit Karma (or download the app for iOS or Android) is a personal finance company. You can use it to check your credit scores as often as you’d like for free. You can also access your credit scores from TransUnion and Equifax, but not from Experian. Credit Karma monitors your credit and sends weekly updates and will notify you if there’s any change to your credit score.

The site also shows you your score and credit factors that affect your score, like if you’re using too much of your credit card limit, derogatory marks and hard inquiries.

credit-karmacredit-karma

Credit Karma shows your TransUnion and Equifax scores.

Screenshot by Katie Conner/CNET

Mint

  • Free
  • Check your credit score for free
  • All personal information is encrypted

Mint (or download the app for iOS or Android) is a free service for managing your personal finances. In addition to tracking your payments, you can use it to find out where your credit score is lacking, like not having a long credit history, and where it’s doing great, like paying bills on time. Mint shows you your on-time payments, credit usage (so you can see if you’re reaching your limit) and average age of credit on one screen.

After you verify your identity, Mint will send your credit report summary and credit monitoring alerts if your score goes up or down.

mintmint

Mint shows your credit information all on one screen.

Screenshot by Katie Conner/CNET

FreeCreditReport.com

  • Free
  • Check your Experian credit report
  • Report information updates every 30 days
  • Monitor credit usage, hard inquiries and late payments
freecreditreportfreecreditreport

FreeCreditReport.com shows your Experian credit report.

Screenshot by Katie Conner/CNET

FreeCreditReport.com is a pared-down service provided by Experian to access your credit report for free. The company provides you with an updated credit report every 30 days. You’ll have access to your account history, like real estate and credit accounts. FreeCreditReport.com shows you hard inquiries on your account, tracks your credit usage and shows any potential marks against you, like late payments.

Note that this only shows your credit report and not your credit score. In order to see your score, you’ll have to upgrade to Experian CreditWorks Plus. You can get a 7-day trial for $1.

Mixing and matching services may help cover more ground

When it comes to checking your credit, there are a lot of ways to go. You can select one service, or pair free services together to access your FICO score from all three major bureaus.

However, if you go that route, keep in mind that you won’t have the promised credit protection and monitoring that Experian, TransUnion and Equifax offer.

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