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Credit Scores & Credit ReportsPersonal Finance

How Can I Improve My Credit Score

By December 6th, 2023No Comments
A document showing a credit report with an excellent score

Key Highlights

  • Your credit score is an essential factor that lenders, banks, and other financial institutions use to determine your creditworthiness.
  • Late payments or applying for multiple new credit accounts in a short period of time can negatively impact your credit score.
  • It is important to monitor your credit score regularly and take steps to improve it if necessary, such as paying your bills on time and managing your credit accounts responsibly.

A credit score is a three-digit numerical representation of a person’s creditworthiness based on their credit history. It’s a measure of how likely they are to repay debts on time and in full. The higher the credit score, the lower the risk for the lender, and vice versa. Credit scores are essential because they help lenders, banks, and other financial institutions determine whether or not to approve your credit or online loan application.

A good credit score can help you qualify for better loan terms, such as lower interest rates and fees, while a low credit score can result in higher interest rates and fees or even a loan denial.

Understanding credit scoring is essential because it allows you to take control of your finances and manage your credit wisely. By knowing what factors impact your credit score, you can take steps to improve it, such as paying your bills on time, keeping your credit card balances low, and avoiding opening too many new credit accounts at once.

How is a credit score calculated?

Credit scores are calculated by credit reporting agencies such as Equifax, Experian, and Illion using a variety of credit scoring models. These models analyse the information contained in your credit report to produce a three-digit credit score that represents your creditworthiness.

The exact formula for calculating credit scores is not publicly disclosed, and different scoring models may give different weight to certain factors. However, credit scores are generally calculated based on the following factors:

  • Payment history: Your history of payments is one of the most crucial factors in determining your credit score. This contains the consistency with which you have made on-time payments, the number of late payments, and the interval between any missed payments.
  • Credit utilisation: Your credit utilisation ratio is the amount of credit you’ve used compared to your total available credit. Tip: Lenders prefer to see credit utilisation ratios below 30%.
  • Credit age: Lenders like to see a long credit history, which means it’s usually best to keep credit accounts open even if you no longer use them. Closing a credit account can shorten the overall length of your credit history, which may negatively impact your score.
  • Credit mix: Maintaining a variety of account types, such as credit cards, student loans, and mortgages, can indicate to lenders that you understand how to manage different types of credit responsibly.
  • The amount owed: The amount you owe on your lines of credit can have a significant impact on your score. Paying off your balances in full every month can help keep your overall amount owed low and show lenders that you’re responsible with credit.
  • Hard inquiries: Whenever you apply for new credit, the lender or creditor will likely perform a hard inquiry on your credit report. Too many hard inquiries can negatively impact your score, as it suggests to lenders that you’re actively seeking credit and may be overextending yourself financially.

It’s important to note that your credit score can also vary depending on which credit reporting agency is providing the information. Each agency may use a different scoring model, and not all lenders report to every agency. Therefore, it’s a good idea to monitor your credit score from multiple agencies to get a comprehensive view of your creditworthiness.

How can I recover from bad credit?

Recovering from bad credit takes time and effort, but it is possible. Here are some steps you can take.

REVIEW your credit reports

If you have bad credit, the first step to recovering is to review your credit reports. You are entitled to one free credit report per year from each of the three major credit bureaus: Equifax, Experian, and Illion. You can access your reports for free at

Reviewing your credit reports will help you identify any errors or inaccuracies that may be negatively impacting your credit score. If you find any errors, you can dispute them with the credit providers to have them corrected.

Additionally, reviewing your credit reports will give you a clear picture of your current debts and outstanding balances, which can help you prioritise which debts to pay off first.

SETTLE all existing credit balances

You can recover from bad credit by settling all your existing credit balances. This means paying off any outstanding debts that you may have. If you have multiple debts, it’s important to prioritise which debts to pay off first. Consider paying off debts with the highest interest rates first, as they will cost you more money in the long run.

If you’re having trouble making payments, you may want to consider speaking with your creditors or a credit counselling agency to see if they can offer you any assistance or payment plans. It’s important to make timely payments, as late payments can have a significant negative impact on your credit score.

Once you have paid off your debts, be sure to check your credit reports to ensure that they have been updated to reflect your new, improved credit standing.

What can I do to improve my credit score?

Pay all your bills on time

Paying your bills on time is crucial for improving your credit score. Late or missed payments can hurt your credit score, as it indicates to lenders that you may be a higher-risk borrower.

To avoid late or missed payments, set up automatic payments or reminders for your bills. This will help ensure that you pay your bills on time and avoid any late fees or penalties. If you’re unable to make a payment on time, contact the creditor as soon as possible to make alternative arrangements.

Only maintain a sensible number of credit cards

Maintaining a sensible number of credit cards is also an important factor in improving your credit score. While having some credit cards can be beneficial for building credit, having too many can make it difficult to manage your finances and may also negatively affect your credit score.

A good rule of thumb is to keep the number of credit cards you have to a manageable level, ideally no more than two or three. This will allow you to keep track of your spending and payments more easily, and reduce the risk of missing payments or overspending.

When selecting credit cards, consider factors such as interest rates, fees, rewards programs, and credit limits. Choose cards that offer benefits that align with your spending habits and financial goals, and make sure you understand the terms and conditions of each card.

Ensure your credit report is error-free

Ensuring that your credit report is error-free is another important factor in improving your credit score. Credit reporting agencies can make mistakes, so it’s important to regularly check your credit report for errors or inaccuracies.

Once you have your credit report, carefully review it for any errors, such as incorrect personal information, accounts that don’t belong to you, or missed payments that you believe you did not make.

If you do find any errors or inaccuracies on your credit report, you can dispute them with the credit reporting agency. The agency will investigate your dispute and correct any errors that they find. This can help improve your credit score if the errors were negatively impacting it.

Don’t close down old credit accounts

Not closing down old credit accounts can be an important factor in improving your credit score. The length of your credit history is one of the factors that credit reporting agencies use to determine your credit score, so it’s important to maintain a long credit history by keeping your old accounts open.

Closing down an old credit account can shorten your credit history and negatively affect your credit score. Additionally, closing down an account can also increase your credit utilisation ratio, which is the amount of credit you’re using compared to the amount of credit you have available. A high credit utilization ratio can also negatively affect your credit score.

If you have old credit accounts that you’re not using, consider keeping them open and using them occasionally to keep them active. However, if the account has an annual fee or if you’re unable to manage the account effectively, it may be best to close it down. In this case, try to close the account with the shortest credit history to minimize the impact on your credit score.

Build up your savings

Building up your savings can indirectly improve your credit score. While savings and credit scores are not directly related, having a solid savings account can help you manage your finances more effectively, which can ultimately improve your credit score.

For example, having a savings account can provide a financial cushion in case of emergencies, which can help you avoid missing payments on your bills or credit accounts. This can help you maintain a good payment history and avoid negative marks on your credit report.

Additionally, having savings can help you avoid relying too heavily on credit accounts. If you have savings to cover unexpected expenses, you may not need to use your credit cards as often. This can help you maintain a lower credit utilisation ratio and improve your credit score over time.

How long does it take to see improvements in my credit score?

According to Experian, rebuilding a credit score might take a few months to several years.

The amount of time it takes to repair a credit score can vary depending on several factors such as the severity of the negative marks on your credit report, the changes you make to your credit habits, and the credit reporting agency used by your lender. It’s possible to see some improvement in your credit score within a few months, but it can take several years to fully repair your credit score, especially if you have had major negative marks on your credit reports, such as bankruptcy or foreclosure.

It’s important to note that repairing your credit score is a gradual process, and there are no quick fixes or overnight solutions. You need to consistently practice good credit habits such as paying your bills on time, keeping your credit utilisation low, and checking your credit report for errors. Additionally, you need to be patient and persistent in your efforts to repair your credit score, as it may take some time to see significant improvements.


Improving your credit score is an important step towards achieving your financial goals. You can gradually improve your credit score over time, by consistently practising good credit habits.

Something to Consider:

Debt consolidation can be a helpful strategy for reducing your debt and improving your credit score. Consolidating your debt into one loan with a lower interest rate can help you pay off your debt more quickly and reduce your overall debt-to-income ratio, which can positively impact your credit score.

However, it’s important to do your research and choose a reputable lender when considering debt consolidation. Make sure to compare interest rates, fees, and terms from multiple lenders to find the best option for your financial situation.

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