I THOUGHT my credit score was perfect but was shocked when I was rejected for a new phone contract in October.
I pay off my American Express credit card in full at the end of every month and if I ever dip into my overdraft, I quickly clear it.
Consumer Reporter, James Flanders, explains how he boosted his credit score using an easy trick
Even though, I don’t have a mortgage or personal loan I believed that my credit file was in decent shape as I’ve never missed a payment.
In fact, my Experian credit score came up as a healthy 999 and I was ranked as “Excellent”.
Yet, my application for a new sim-only contract with Vodafone via Carphone Warehouse was cancelled within seconds of applying after the firm ran an automated hard credit check.
Stupidly I’d forgotten that there are three credit reference agencies – Experian, Equifax and TransUnion – and you have no idea which one is being used by lenders.
I didn’t realise that Vodafone had run a credit check with Equifax, where my score was considerably lower.
My Experian and TransUnion scores are rated as “Excellent” but my Equifax score was just 755 out of 1,000 – translating to a “Good” score.
While lenders don’t have to explain why they reject you, it may have been one of the factors that led to my rejection from Vodafone.
How I turned my good score to excellent
I was aghast – but there was a way to turn it around and in just three months I’d moved my “good” Equifax score to “excellent”.
I began my search online by simply googling “how to boost my credit score”, but I was flooded with generic tips, including ensuring I was registered to vote and ditching accounts which I no longer use.
Instead, I decided to try out Loqbox, which promises to help boost your score by up to 300 points within 12 months – but there’s a catch.
You have to borrow cash, so you really should only do this if you’re on top of your finances and sure you can stick to the deal.
Loqbox loaned me £250 for 12 months – but the money stays locked away in your online account.
Over the year, you pay back £20 a month back into your Loqbox account automatically through a direct debit.
It then reports your successful repayments to all three credit agencies – boosting your credit score.
And after just three months’ worth of payments, my Equifax score rose by 103 points – from 755 to 858 – nudging me into the “excellent” category.
Sarah Coles, personal finance expert at Hargreaves Lansdown said in response to my success: “This is a brilliant example of how relatively small changes in your habits can make a really big difference to your score.”
“Your score might suffer if you don’t have any record of borrowing and paying the money back.
“It feels counter-intuitive, but it can actually help to get a credit card or personal loan.”
Tom Eyre, co-chief executive and co-founder of Loqbox told me that 88% of Loqbox members do improve their credit score within a matter of months.
Obviously, this method still comes with risks – like with every form of borrowing.
Tom said that around 18% of Loqbox Save customers have been unable to make repayments.
And missing a payment will have a negative impact on your credit score, reducing your chances of being accepted for cheap credit in the future.
Any Loqbox customers that are worried about not meeting their repayment schedule should get in touch with the firm via email or through its online chat service on its website.
Other ways to boost your score
There are a number of free and cheap ways to help boost your credit score including.
For example, getting on the electoral register proves who you are and where you live meaning it’s easier to get credit if you’re on the list.
You can sign up by registering to vote on Gov.UK.
It’s also vital that you don’t make too many credit applications because lots of requests in a short period of time can be seen as a sign of financial distress.
Use a “soft-search” eligibility calculator to show how likely you are to be accepted – websites like MoneySavingExpert.com offer these.
You should always pay your bills on time. This is because Late payments are also recorded in your file.
If you can try and cut down your existing debt before applying for new credit as lenders may be reluctant to lend to you if you already have a large amount of debt.
Using credit-builder credit cards for small affordable purchases can show that you’re a responsible spender and it can improve your chances in the eyes of lenders.
It’s vital to ask yourself if you actually need to borrow before committing to a new credit card or personal loan.
If you cannot afford to pay off a debt you currently have, then you should avoid taking out any more debt at all costs.