We don’t know about you, but when people mention credit scores it is normally accompanied with a healthy dose of confusion and misinformation. Because of this we’ve put together a quick guide on what exactly a credit score is and how you can improve yours.
What is a credit score?
A credit score is calculated from the information provided on your credit report. A credit report is something that is generated from your financial history. Although the marking for credit scores is different for each credit referencing agency, a good example would be Experian who provide credit scores out of 999 and define a good credit score as anything that’s 881 or above.
Why does it matter?
Your credit score is important as it is what determines whether lenders will loan to you, how much you are allowed to borrow and how much interest they will charge you. For example if your record shows that you have previously missed payments, this might mean that you will be charged more interest as lenders will see you as higher risk.
How do I improve my score?
There are many things you can do to improve your score; a few of which are outlined below:
- Pay your bills on time – this may seem obvious but missed payments are one of the main reasons for bad credit. Think about changing your direct debits to pay day to make sure these go through smoothly.
- Register to vote – if your name is on the electoral roll it is much easier for you to get good credit. This is because it allows lenders to confirm you are who you say you are.
- Pay off any debts – existing levels of debt are a red light to lenders and means they are less likely to let you borrow from them.
- Get a credit building card – these cards are designed to help people improve their credit scores by providing an opportunity to show that you can pay off bills quickly and efficiently. Ask your bank about these and which ones they would recommend for you.
These are just some of the ideas you can think about implementing to get a better credit score and if you’d like some more help with managing your money, see our budget planner tool.