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Home > Blog > How To Improve A Bad Credit Score

How To Improve A Bad Credit Score

Published: 21st August 2020

Improving a bad credit score takes a lot of effort to change bad habits in order to increase your credit score from being very poor. A good way to improve your credit score is to first backtrack and start to understand what actions have led to your bad score.

It’s important to recognise that improving your bad credit score (especially from very poor) will take a long time and requires a consistent effort and a permanent change of bad habits. Missing payments, racking up large bills on your credit card and general bad management of money is a big no-no. 

If your score is verging on the side of bad/poor and you’d like to learn how to start to rebuild your credit score, here’s how to get started.

What Is a Bad Or Very Poor Credit Score?

Before we get into the nitty-gritty of how to improve your bad credit score, it’s first paramount that you’re aware of the credit score system and what is considered good and bad. 

This will help you not only compare where you want to be but will allow you to monitor your progress through the minefield that is your credit score.

There are numerous different credit rating systems available that use different metrics and ratings, however, they all centre around a similar ideology. Your credit score is usually marked down as somewhere between ‘very poor’ and ‘excellent’. 

Credit Score Ranges

There are a few prime examples of different rating systems that are very simple to follow and follow similar concepts. 

  • Experian uses FICO metrics ranging from 300 to 850
  • ClearScore uses Equifax ranging from 0 to 700

Using Experian’s guidelines if your score is below 579 you are considered to have ‘very poor’ credit, while above 670 is considered ‘good’. So if you have bad or very poor credit, it would be your initial goal to climb out of the red and into the green. 

With that being said not all credit scores take the same amount of time to improve, ‘very poor’ or ‘bad’ credit scores will take longer to improve due to how long negative credit stays on your report.

7 Tips To Improve Your Bad Credit Score

You’ll find out that improving your credit score (especially from ‘bad’ or ‘very poor’) is not an overnight job. Improving your credit score takes considerable time and is something you have to stick with. 

Luckily, we’ve compiled a list of seven tips to improve your bad credit score from ‘very poor’ to something a little more tolerable. 

1) Make Payments In Full & Ontime 

This is possibly one of the most important rules to follow as missed payments or any type of negative strike will stay on your report for seven years. Naturally, this is something you’d like to avoid as it can cause long-term damage to your credit score. 

Whether it’s a loan, mortgage, bill, phone contract making sure to keep on top of payments can be a great way to not only improve your bad credit score but to maintain your sparkly new one.

It can be confusing with all the different bills coming out of your account throughout the month, so it may be helpful to set up direct debits if you haven’t done so already. If you’re a forgetful person this can be a lifesaver to avoid missing any more payments. 

However, if you’re missing payments for other reasons, there are solutions. If you’re slipping up because your dates for important bills are awkward you can always contact the company, and more than likely they’ll be happy to move your billing date a few days in either direction.

2) Consider Using Your Savings To Pay Off Any Debt

Not everyone is lucky enough to have savings and even if you do your lump sum may be sitting there for a specific purpose. However, if you have a considerable amount of savings and equal amounts of debt it would definitely be worth paying off at least some of it. 

Debt can lead to missed payments, debt can be contributing to credit utilisation, bad debt all round is not helpful for your credit score. By clearing off your debt it will be easier for you to improve your bad credit score to something more manageable. 

It is advised that your credit utilisation should be under 30% to show your not overly reliant on borrowing. So if you can’t clear the whole thing, if you can pay enough to get it under 30% it will help contribute to improving your bad credit score.

3) Check Your Credit Score Report Regularly

One of the best ways to improve your credit score from very poor is to monitor your progress. This may seem obvious, but according to Experian 49% of UK adults* have never even accessed their report, let alone worked towards improving their credit score. 

There are numerous sites online to provide you with regular credit reports, the best part? These reports are considered ‘soft searches’ which unlike a ‘hard search’ doesn’t negatively impact your credit score. Meaning you can check it as much as you like with zero consequence.

Having your credit score report readily available to you is the best way to understand what is contributing to your bad credit score and how to improve it. Most sites will show you your score, the good things you’re doing and ways you can improve – understanding what’s going wrong is the best way to know how to put it right.

Improving your credit score is a sizable task as it is, never mind working your way up from ‘very poor’ so it can sometimes be helpful to see positive results to keep you motivated.

4) Avoid New Hard Enquiries (If Possible)

Hard enquiries contribute to ‘hard searches’ on your report, which on their own are not a bad thing. This information is not visible on your report and not available to possible lenders. So what’s the issue? 

Numerous hard enquiries can start to harm your credit score, this is because your score is made up of different factors that detail how reliable and consistent you are as a borrower. If you are making numerous applications for more credit, you can be seen as overly reliant.

As a general rule of thumb, you should leave at least a gap of three months between enquiries. Yet, avoiding hard enquiries where possible is preferred.

5) Get Help Building Your Bad Credit Score

Building credit relies on you having credit in the first place, which is an issue when your credit score is ‘bad’ or ‘very poor’ and you have no available credit. It’s difficult to secure any type of credit when your score is at the lower end, so you may need some help.

There are numerous ways that you can get help to build your credit score:

  • Become an authorised user on someone else’s credit card
  • Cosign on a lease or loan with someone who has good credit
  • Open a secured card account and make purchases little and often

6) Show Reliability Through Making Regular Repayments On Your Credit Card

Consistency is the number one way you’re going to transform your credit score from ‘very poor’ to ‘good’. If you have a credit card making small purchases and repaying in full each month is a great way to show lenders that you’re trustworthy.

As mentioned in step one, it can be helpful to set up direct debits to avoid missing payments. It’s also good to keep in mind that you should ideally not be exceeding 30% of your credit limit when making purchases. Make purchases little and often. 

If you do not have a credit card and are struggling to get accepted there are a few routes you can go down. The first is becoming an authorised user on someone else’s credit card, that way you can share the benefits as long as payments are made on time. 

The other is to apply for a secured credit card. These are much easier to acquire than a traditional unsecured credit card. Basically, you would deposit an amount into the lender’s savings account and in return, you receive a credit card with a similar limit as to what you deposited.

7) Improve Your Credit Habits

While the other steps are important they’re nothing without permanently changing your credit habits, spending, paying bills on time, credit utilisation etc. Changing your credit habits is an important way to make sure your credit score is consistently catered to.

The best way to do this is to replace your bad credit with good credit, only buy things that you can afford to pay back, make small purchases, and repay in full every month. This shows lenders that you’re able to reliably borrow and repay consistently. 

This much like improving your credit score will not happen overnight. Changing bad habits can take months, even years to correct. 

CREDIT CARD

How To Improve Your Score From Very Poor

There are numerous reasons why your credit score may be rated ‘very poor’, some may be completely out of your hands and situational. But with that being said you’re still stuck with a bad credit rating that needs some serious TLC.

Improving your credit score from ‘very poor’ can be difficult because you’re undoing presumably years of damage. While there are many ways to hurt your credit score and many ways to fix it – there are certain things you’re going to want to do in specific situations.

How To Improve Bad Credit Score Due To Late Payments

Your payment history makes up the largest portion of your credit score with a whopping 35%. Meaning that missing payments is one of the most harmful things you can do to bring your credit score down. 

Putting the time and effort into ensuring your payments are made in full, one time can work to correct years of impairment. It’s important to know that missed payments are present on your report seven years after your last encounter. 

As we’ve already mentioned there are numerous reasons as to why you would be missing payments and numerous ways to fix those errors. If you want to learn more about being consistent with payments, we’d recommend you revisit section one of our tips to improve your bad credit score.

How To Improve Bad Credit Score When In Debt

Debt can be present in a variety of forms, credit card bills, loans, mortgage repayments. However, debt isn’t always bad when it comes to improving your credit score. Debt is actually key to improving your score, without borrowing and repaying it’s difficult for lenders to paint a clear picture of you. 

So being in debt alone isn’t going to hurt your credit score. Although, letting the debt mount up by not making payments and letting the interest stack up will. Which is why we’d recommend using any savings you have available to clear some of your debt down, ideally below 30%. 

Otherwise, making payments on time will only help to improve your credit score.

How To Improved Bad Credit Score With IVA

The experience of not only going through an IVA but the aftermath of the reasons why you would need one in the first place can warp your credit score beyond recognition. If you currently have or have had an IVA it can be said that your credit score is most likely ‘bad’ or ‘very poor’. 

If you have looming payments from multiple lenders that you physically can’t keep up with an IVA can help you get back on track to good financial health. It’s important to note while it takes a lot of time and effort, you can come back from an IVA and still improve your credit score from ‘very poor’.

Once your individual voluntary agreement is marked as complete, after seven years it will be completely removed off of your account. Nevertheless, you can still be working towards improving your credit score in the meantime following our simple seven steps to better credit health.

How To Keep Your Credit Score From Slipping Back To Very Poor

It would be a shame if all that hard work was for nothing, so it’s vital that when you’re looking to improve your credit score that you’re also working to stop it from slipping back into the ‘bad’ territory. 

If you’re serious about improving your credit score, here are ways to not only boost your score and maintain it.

Use Your Credit Report To Flag Issues & Monitor Progress

A good way to prevent making the same mistakes is checking your credit report on a regular basis, this will flag any potential issues straight-away so you can work to fix them before they become any bigger. It also gives you a holistic view of your current credit situation, where you could be and what you need to do to get there.

Don’t Miss Payments

Do not miss any payments. This is the number one way to revert your credit score back to ‘bad’ or ‘very poor’ without fault. Put the time into collating your payments, organising them, setting up direct debits, and changing the dates of said payments if needed.

Request A Credit Limit Increase

Requesting a credit limit increase in order to keep your credit score from dropping is slightly odd, no? Well, there’s actually some logic behind it. By increasing your credit limit, you’re increasing the amount of money you’re able to borrow and therefore you’ll have to spend more to utilise more of your credit. 

This is perfect for those that use their credit card each month and struggle to keep their spending under the 30% mark (50% at a push). 

Build Your Credit Score From ‘Bad’ Or ‘Very Poor’ With Affordable Car Leasing

If you’re looking for ways of improving your bad credit score from very poor, we provide affordable bad credit car leasing to help get you back on the track to financial wellbeing. To find out more simply fill out our enquiry form, or call us on 0203 823 1010 to speak to one of our personal advisors. 

If you’re curious as to what cars we have available, browse our range of car leasing deals. We’re adamant we’ll have something in stock to take your fancy.

 

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