Money For Lunch – All You Need To Know About Credit Scores

All You Need To Know About Credit Scores

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We’ve got everything you need to know about credit scores, right here! Find out how to view your credit score, improve it and more!

If you’ve ever taken out a loan, credit card or some form of financial product, you’ll have a credit score. And even if you’ve never had a financial product, you’ve most definitely got a credit score. Because everyone has a credit score. But how do you know if your credit score is good or bad? More importantly, do you know how to check it?

Having good or bad credit can affect your financial borrowing options in the future, so it’s essential to know where you’re at. Those with good credit scores have the best loan options and more open to them, whilst those with bad ones, aren’t so lucky. Those with bad credit scores can borrow money, such as using loans with a guarantor, but they don’t get the best rates, unlike their good credit holding counterparts.

If you’re looking to learn all about credit scores, you’re in the right place. We’ve got all the essential information on what counts as a ‘good’ in terms of credit, how to check your score and, most importantly, how to improve it. This is your guide to credit scores.

What is a Credit Score?

Your credit score is like your financial footprint. It’s a digitised record of every financial product you’ve ever taken out and paid off. It includes bills, loans, credit cards and mortgages too. When you apply for a mortgage, credit card or another financial product, lenders will pull up your credit score to judge what you’re like as a borrower. Good credit typically means you’ve paid off your bills on time and kept up with loan repayments, for example. And bad credit is the opposite. Sometimes, you can have bad credit if you’ve never had a financial product. By not paying household bills, taking out a loan or credit card, it means you’ll have no credit (which in the eyes of lenders, is just as bad as poor credit).

Effectively, your credit score informs the lender how reliable you’ll be as a borrower. Will you pay back the loan on time? Will you be able to meet monthly repayments on your credit card? It’s so they can judge their investment by offering you a loan. The better your credit score, the better interest rates you’ll be offered – because you’re more likely to meet monthly repayments. However, if your credit score is poor, you may find that you won’t get great rates or even qualify for some financial products. It’s essential that your credit score is monitored and worked on, especially if you’re looking to take out a loan, credit card or anything else.

Why bad credit?

There can be a multitude of reasons your credit score is poor. Like we’ve said, by not meeting repayments on time your credit can be affected. Never having built a credit profile can mean your credit score is considered bad. But, if you’re linked to someone, financially, with bad credit this can affect your score too. Things like closing an old account or even moving address a lot can impact your credit score and make it worse. If you’ve recently taken out a new line of credit (like a credit card or loan), this can affect your score too (in the short-term). You should always try and closely monitor your credit report, to look for changes and errors.

How can I check my credit score?

There are a number of free websites that allow you to check your credit score. It’s important to remember that these sites free sites won’t give you the most up to date version of your score. There’s usually around a 2month delay on your credit report, which means, that if you want the fully up to date version, you’ll have to pay. You can either sign up for a membership or pay £2 to access your full credit report (it’s your legal right!).

There are 3 main agencies that cover UK credit scoring: Equifax, Callcredit and Experian. Each of these agencies has different scale on which they judge credit scores on. Equifax score out of a total of 700, Experian out of 999 and Callcredit out of 5. If your credit score is good, it will look like this for each agency:

  • Equifax – 420/700
  • Experian – 880/999
  • Callcredit – 4/5

You can use websites like ClearScore or Noddle to check your credit score online, for free!

How do I improve my Credit?

Building your credit back up can be challenging, but it is fully possible. It takes time, but it can be done. The key is to know where you stand. By assessing your credit score, you should be able to see where your credit is at. It’s essential before you start working on improving your credit that you check your full credit report. Because being financially linked to someone with bad credit can be bad for your own. There may also be errors on there that you need to check. If you’ve been the victim of fraud, this can affect your credit score. So, it’s important to raise any errors you see with your credit agency.

There’s so many things you can do to improve your credit score. You should register to vote and try and stay at a single address for over a year. These will help improve your credit score slowly. If you’ve got no credit, think about getting your name on some of the household bills or a mobile contract. You’ll be able to build up your credit profile as you pay for bills – as long as they’re paid on time. Taking out a bad credit loan, such as a guarantor loan, can actually help you rebuild your credit score as you pay it off.

You’ll need a good credit score in order to improve your credit options in the future. Those with good credit scores get the best rates on credit cards, loans and mortgages, so it’s a good idea to work on improving your credit whilst you don’t need a loan or anything else. If you have good credit, you’ll be better off in the future.

Author Bio:

Robert Smoker, the CEO of TFS Loans, has an extensive work history within the finance sector. Having worked with a prestigious Private UK bank for over 36 years, Robert has had many head and executive financial roles under his belt since the late 70s. His extensive knowledge of the financial and loans sector carries into his writing, creating content for financial blogs and more.

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