A poor credit history can make borrowing harder and more expensive. There is no overnight fix, and anyone who promises one is worth approaching with caution. But there are well-established steps that can help over time. Here is what is worth knowing.
What has been updated
This guide has been rewritten to reflect current UK guidance from the Financial Conduct Authority (FCA), MoneyHelper, and the three main credit reference agencies: Experian, Equifax, and TransUnion. The original version dates from 2018. The steps themselves have not changed dramatically, but the context around soft searches and credit file rights has been clarified.
Why does this matter?
Your credit history affects whether lenders will consider your application and on what terms. A thin or damaged credit file is not permanent. Understanding what is on your file, and why, is the first practical step.
Be careful if you encounter services that claim to "repair" your credit for a fee. The FCA warns consumers that credit repair firms cannot remove accurate information from your file. Anything a paid firm can do, you can do yourself for free.
Who may be affected
- People who have missed payments or defaulted on credit in the past
- Anyone who has never borrowed and has little or no credit history
- Those who have been rejected for credit and do not know why
- People who have recently moved, separated from a partner, or changed their name
Step 1: Check your credit file at all three agencies
Three credit reference agencies hold data about you in the UK: Experian, Equifax, and TransUnion. Lenders do not all report to the same agency, so information can differ between the three files.
Checking your own file does not affect your credit score. This is called a soft search and leaves no trace that other lenders can see.
A useful first step is to obtain your statutory credit report from each agency. Under UK law, you have the right to see your credit file. Errors do appear, and you can raise a dispute directly with the agency if something looks wrong.
If there is a financial association on your file, for example, a joint account with a former partner, and that person has a poor credit history, it may be worth applying to have the association removed once the account is closed.
Sources: Experian, Equifax, TransUnion, MoneyHelper
Step 2: Register on the electoral roll
Lenders use the electoral roll to confirm your name and address. Not being registered can make it harder to pass identity checks, even if the rest of your file is in reasonable shape.
Registering to vote takes a few minutes via the UK Government's online service. It is one of the few things that can have a relatively quick effect on how lenders view your application.
Source: MoneyHelper, UK Government
Step 3: Use soft searches before you apply
Every time you make a formal credit application, the lender carries out a hard search. Hard searches are recorded on your file and are visible to other lenders. Multiple hard searches in a short period can suggest financial pressure, which may concern some lenders.
Many lenders and comparison tools now offer eligibility checkers that use soft searches. A soft search lets you see whether you are likely to be accepted before you apply, without leaving a mark on your file.
If you are already worried about your credit history, checking eligibility this way before making any application is worth considering.
Sources: FCA, MoneyHelper, Experian
Step 4: Build credit carefully, and only if you can afford to
A thin credit file, one with little or no borrowing history, can be as much of a barrier as a damaged one. Some people find that using a credit-builder card, a small credit union loan, or a credit-builder savings account helps add positive payment history over time.
Be careful here. Taking on credit to improve your credit history only makes sense if you can comfortably make every repayment on time. A missed payment adds a negative entry to your file and may stay there for six years.
If you are already struggling with existing debt, adding new credit is unlikely to help. In that situation, free debt advice is a more appropriate first step.
Sources: Citizens Advice, StepChange, MoneyHelper, FCA
What to read next
For more detail on how lenders assess applications when your credit history is poor, see our guide to bad credit loans.
To understand what is actually on your credit file and how to read it, see our guide to credit reports and scores.
Sources
- FCA (Financial Conduct Authority): consumer guidance on credit repair firms and responsible lending
- MoneyHelper: practical guidance on checking your credit file, electoral roll registration, and soft searches
- Citizens Advice: information on credit-builder products and managing debt
- Experian: guidance on how credit files are built and checked
- Equifax: guidance on credit file rights and statutory reports
- TransUnion: guidance on how lenders use credit data
- StepChange: free debt advice charity; 0800 138 1111