Credit Score 101 – David

CREDIT SCORE 101

BY DAVID STEPPINGS

In today’s world most people at some point in their life will need credit, be it for a personal loan, car finance or mortgage.

What a good credit score can do for you A good credit score offers more than just bragging rights. Having a high score makes it easier to be approved for credit cards and loans, qualify for lower interest rates and get higher credit limits and loan amounts. Not only that, but your credit score also opens up a range of credit card options, including top-tier rewards credit cards.

Why your credit score is important Your credit score is calculated based on your financial behaviour. The simplest way to build your credit score is to pay any existing credit cards (at least the minimum payment), loans, and mortgages on time, and keep within all agreed credit limits.

How you make your payments and how much you pay is reported every month on your credit file and general affordability.

Lenders look at all of these factors when you apply to borrow from them. They’ll also take into account how much credit you owe compared to your income, to form an overall picture of your credit worthiness.

This is why your score can determine whether you’re a worthy borrower when applying for a mortgage or other methods of financing. The better your credit score, the stronger your chances are of being accepted for credit. Do you know what your credit score is? You can check your credit score and obtain a full report free of charge. It is worth doing this to see what your credit report looks like and to ensure there are no factual errors.

David

There are multiple providers you can use to check your credit score, to name a few; • Experian www.experian.co.uk • Equifax www.equifax.co.uk • Check my file www.checkmyfile.com this one in particular checks data from Equifax,

Experian, TransUnion and Crediva

The report will show all credit agreements you have including credit cards, loans and mobile phone plans and looks at whether you make repayments on time and in full.

In addition to these, we are seeing more ‘buy now pay later’ schemes. Although these might not run a ‘hard credit check’, which can leave a footprint on your credit report, any outstanding balances can appear and will be taken into account for affordability.

Student Loans are not factored into your credit report but could have an impact on affordability, if you’re still paying this off when it comes to applying for a mortgage.

Interestingly, your credit score may be lower if you have never borrowed any money, as it marks an absence of proof that you are a reliable borrower.

Ways to increase your credit score You can get a bad credit score by failing to make repayments on time or by missing them altogether.

Default or bankruptcy will stay on your credit file for 6 years, so it’s important to stay on top of your repayments. If you feel you need to improve your credit rating, there are things you can do to achieve this: • Register on the electoral roll • Pay your bills on time • Use a credit card little and o en • Fix any errors on your credit record by contacting the company provider • Check if you are linked to another person. A spouse, relative or friend linked to you through a joint account, mortgage or loan together could affect how you are viewed by lenders if they have a poor rating. If you end financial ties with someone, contact the credit reference agency to get them removed from your own credit report.

A helpful website to learn more about how to read your credit report can be found here