What you need to know about your credit score and how you can improve it

YOUR credit rating is really important - it can help you get accepted for a mortgages, loans and credit cards.

But it can be confusing - and if you're got a low score then you'll struggle to get the best rates.

Our Card Smart series, in association with Barclaycard, helps you work out how to make the most out of your credit card and save money – and in this edition we’re talking all things credit ratings.

What is a credit rating?

Your credit rating shows how well you’ve managed your borrowings over the last six years.

It is calculated by Credit Reference Agencies and lenders use it to understand your past and present behaviour to decide on how risky it would be to give you credit.

There are three main credit reference agencies in the UK, and different lenders use different agencies.

Each agency scores you slightly differently. Experian rate you on a scale of 0-999, Equifax from 0-100 and Call Credit from 0-710. Regardless of the agency, the higher the score the better.

The four main categories that determine your credit rating are: personal information, credit history, enquiries and public records.

What is your credit rating used for?

Most people know that credit ratings are used to assess your eligibility for mortgages, loans and credit cards, but they’re used for other things too.

Companies may also check your credit rating when you’re applying for mobile phone contracts, utility payments, and car and home insurance.

How can you improve your credit rating?

The best way to improve your credit rating is simply by keeping on top of your finance. There are several things you can make sure you’re doing.

• Always make credit payments on time
• Pay more than the minimum payment on your credit card
• Stay within your credit limit
• Register on the electoral roll
• Avoid taking out cash on your credit card
• Keep track of your old accounts
• Pay any outstanding County Court Judgements (CCJs) or defaults.

Remember, when it comes to credit ratings, knowledge is power, so if you’re trying to improve yours then make sure you check it regularly.

There are plenty of free sites which will show you your credit rating for free. Keeping an eye on it regularly helps you understand what you’re doing right and what you’re doing wrong, and will make sure you spot any errors that could be holding you back.

Things to avoid

There are lots of things that could affect your credit rating negatively.

Avoiding the below will help you keep your credit rating on top form.

• Missing payments
• Making late payments
• Making lots of credit applications within a short space of time
• Going over a credit limit
• Defaulting on credit agreements
• Frequently withdrawing cash from a credit card
• Not being on the electoral roll
• Moving house too often