Small changes that boost credit score and save you thousands without costing a penny

A credit score is a crucial tool in personal finance, used by institutions to gauge how well you manage your money and repay your debts. It's a particularly pivotal figure when it comes to any type of loan, from mobile phone contracts to mortgages and personal loans. Consequently, those with a less-than-stellar credit score may find themselves shelling out thousands more in interest compared to their counterparts with good or excellent scores.

Totally Money revealed that individuals with a poor score could end up paying an extra £6,670 on a £5,000 loan. Stellar credit scores not only unlock access to better interest rates but also enable people to borrow larger sums with more favourable deals and may even unveil products that those with poor scores can't see at all. Another alarming statistic uncovered by is that only one in four people have checked their credit report in the past four years, 32% of whom discovered an error that had been negatively impacting their score and likely causing them to pay more for no valid reason.

Andrew Hagger, the personal finance guru from who crunched the numbers, has issued a stark warning: "Having a (poor credit score) can lead to a spiralling debt situation that’s difficult to escape from unless you’re very disciplined and able to manage the higher monthly costs while your credit score gradually recovers. If you’ve had credit issues in the past, a lender will consider you higher risk and price their products accordingly — it may seem unfair but it’s the harsh reality when it comes to borrowing money."

There are various lesser-known factors that can boost a credit score, including some that aren't directly linked to financial wealth. For instance, simply registering to vote can enhance your score by verifying your identity and residence.

One of the worst things for your credit rating is a lack of credit history; those who've never had a credit card, payment plan, or contract, for example those who pay for everything in cash or are just starting their financial journey as young adults could be penalised for this absence. Getting a mobile phone contract is an easy fix to start building credit without diving into major fiscal commitments.

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Keeping up with bill payments, steering clear of maxing out credit cards, and regularly checking your credit report for errors can all contribute to a healthier credit score, unlocking better deals and more attractive interest rates. Alastair Douglas, CEO of TotallyMoney, also chimed in with his advice, offering a checklist for tidying up your credit report, especially if you're eyeing loans that will scrutinise your creditworthiness.

He advised: "The first steps you should take before applying for any borrowing is to check your credit report, make sure everything is up to date, and fix any errors. While some websites might charge you to do this, you should never pay, as the data is yours — so find an app which will let you do this for free."

"You should also spend some time shopping around for the best deal. This means going to different banks and comparison sites, and checking your eligibility before finding the best offer for you. And remember, make sure you can afford the repayments, and try to never borrow more than you need."

"Some lenders are now using open banking data instead to make their decisions. This means that if you give them access to your data, they can make a more accurate assessment of your ability to repay the debt. That way, it can be more personalised, and you might even be able to secure a better rate."