How to improve your credit score

If you’re planning on financing your next set of wheels, a good credit score doesn't just increase your chances of approval. It also paves the way to better interest rates, making your dream car that much more attainable.

The higher your score, the better the finance deals you can unlock, leaving more in your pocket for those adventure-packed road trips.

If your credit score isn't quite where you want it to be just yet, don't stress. We're here to help you on your journey to a great credit score.

Read on to discover the top tactics to improve your credit score, ensuring you're best placed to secure the best car finance deals out there.

Got a specific question? Why not jump to:

• How are credit scores worked out?
• What can I do to improve my credit score?
• Why is improving my credit score important?
• How long might it take to build my credit score?
• How can I check my credit score?

How are credit scores worked out?

If you’re looking to give your credit score a boost, understanding how it works is crucial.

Let's break down the nuts and bolts of how your credit score is worked out:

Payment history

Credit agencies comb through the track record of your previous payments. This includes everything from your credit card bills to loan payments and utility bills. 

If you’ve missed payments, it’s going to lower your score and cause lenders to think twice about giving you credit.

Credit utilisation

Think of this as how much of your credit you're actually using.

A good rule of thumb is to keep your credit spending as low as possible, showing you're not reliant on maxing out your cards each month.

Length of credit history

How long you’ve had your credit accounts matters to lenders.

A longer credit history can shine favourably on your score, showing you've got a lot of credit-handling experience under your belt.

However, if your credit history shows you’ve missed payments and haven’t managed your credit well, it’s going to put a dent in your score.

Types of credit

A mix of credit including car loans, credit cards, and maybe a mortgage, demonstrates you're versatile and responsible across the board.

Remember, lenders look at these factors not just to calculate your score, but to decide on the rates and terms you'll be offered.

What can I do to improve my credit score?

Ready to take control and increase your chances of getting  a great car finance deal? Let's work on improving that credit score!

While you aren’t going to be able to boost your score overnight, there are actionable steps you can start right now to get you on the right track.

Here are some practical steps you can take to get your credit score in a better shape:

Get on the electoral roll

Being on the electoral roll helps creditors confirm who you are and where you live. 
It's a breeze to sign yourself up and it’s one of the few things you can do to instantly improves your score.

Never miss a payment

You’ll never get a good credit score if you keep missing payments. Setting up direct debits is a smart way to ensure you're always on time.

Every punctual payment you make is a stride towards a healthier score.

Start building credit

New to the credit scene? Kick off with something small like a credit-builder card or a small loan.

Manage it wisely, keep up with payments, and you'll gradually build a score to be proud of.

Address past due accounts

Overdue accounts can significantly weigh down your score. Tackling these debts stops them from causing further damage and sets you on a path to recovery.

Lower your credit card balances

High balances send the wrong signal to lenders. It makes it look like you’re relying too heavily on credit, which could hint at financial troubles.

Work towards reducing your balances to improve your credit utilisation ratio (a percentage figure that indicates how much of your available credit you’ve used), and watch your score slowly start to creep up.

Ease up on new accounts

Each new application you make can temporarily reduce your score. Be strategic about when you apply for new credit and how often you submit applications to keep your score steady.

Watch out for fraud

Regularly check your credit report for anything that looks out of the ordinary. Fraud can ruin your score and you can end up spending months if not years repairing the damage.

Staying vigilant lets you nip any suspicious activity in the bud before it can cause any lasting damage.

Stay put when you can

Lenders value stability, including your living situation. Moving house too frequently can make lenders wary.

Avoid cash advances

Using your credit card for cash withdrawals can look like you're struggling financially, not to mention it comes with steep fees and interest.

Avoid withdrawing cash from your cards to maintain a healthy score

Why is improving my credit score important?

Improving your credit score does more than just boost those numbers.

Here's why enhancing your score can a game-changer when you're looking to take on car finance:

It opens doors to approval

A high credit score increases your chances of getting the green light on credit applications, including car finance.

Helping you snag better rates

A good credit score can unlock lower interest rates. This reduces the total cost of your car loan, letting you keep more cash in your pocket.

Wider choices, better deals

With a good score up your sleeve, you get access to a broader range of deals. 

How long might it take to build my credit score?

Building up a good credit score is more of a marathon than a sprint. So don’t expect it to change overnight.

You need to prove your financial reliability through consistent, smart habits over time like making on-time payments.

If you're building from the ground up, just laying down a credit foundation could take a few months. And if you're nursing a bruised score back to health, it could stretch out even longer.

With the strategies mentioned above, you will notice your score moving in the right direction within months. However, a true, substantial boost in your score may take months, if not years.

How can I check my credit score?

It’s easy to check your credit score and it won’t cost you a penny.

Platforms like CreditKarma and ClearScore give you access to free credit score checks when you sign up. 

You can also sign up with the three credit reference agencies: Experian, Equifax, and TransUnion. They let you check your score directly on their websites.

Many banks have jumped on the credit score bandwagon too. Take a moment to explore your bank's digital tools and you may find your credit score right there waiting for you.

Making a habit of checking your credit score is smart, especially since it's mostly free. 

At Carmoola, your credit score plays a crucial role in shaping the APR and loan amount we can offer. 

Taking time to improve your score can help you get a low-rate deal on that car you’re eyeing up.