Clearing Up Credit Score Confusion

Your Credit Score is a 3-digit number that describes how likely you are to be accepted for credit from Banks or other finance companies.  Each individuals Credit Score is based on their unique credit report, which is a record of how they have managed credit in the past.  If you are looking to borrow money then you need to be aware of your score so you can get the best interest rate. 

In the UK, there is no standard Credit Score.  Each of the 3 credit reference agencies, Experian, Equifax and Callcredit – all use different ways to calculate credit scores.   Experian is the largest credit reference agency. It’s commonly used by lenders, so it’s likely to be very comprehensive.  You can sign up for free to check your scores with each agency to ensure the details they hold on you are correct.  

What should I check on my credit score

1. Check addresses on old accounts.

2. Fight unfair defaults on your file.

3. If you no longer have joint accounts with someone, ensure you financially de-link (ie, separate).

4. Always check your credit reports after rejection. Read why here.

5. Cancel unused credit and store cards. Find out why unused cards can count against you

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The importance of a good credit score

There are several reasons to have a good credit score.  For example, if you hope to take out a mortgage or take a bank loan in order to finance home improvements or the holiday of a lifetime.

Your Credit Score will need to be in good shape in order to get the best interest rates from your finance provider.  The higher your credit score the better.  A high score means that you are more likely to be given credit and achieve better deals when borrowing money or taking out a mortgage.

Ways to achieve a good Credit Score

  • Don’t apply for credit too often

    If you apply for an excessive number of credit products regularly, it is likely to have a detrimental effect on your credit score.  So be sensible, decide which product you want before you apply to lots of different companies. Sometimes it could be beneficial to use a loan matching service.  These services help match or connect you with ne or more lenders.  One such company is iloans.  They are regulated by the FCA and never charge the lender a fee.

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  • Be stable

Finance companies don’t like borrowers who are not stable.  They like lenders who have lived at the same address for a while so bear this in mind if you are thinking of moving on a regular basis. 

  • Don’t pay your lender late

If it’s your credit card repayments, your phone bill or your mortgage, it isn’t good to pay your lender late. Make sure you pay on time, why not set up a direct debit so your payment always gets there on time?

  • Build trust with lenders

Your relationship with lenders isn’t different from other relationships, you need to build up trust.  You can do this by consistently paying your bills on time.  

 

 

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