If you want to borrow money, you will need a good credit rating to access the best deals.
Whether you are applying for a credit cardWhether you are looking for a mortgage to buy a home or looking for a loan, you will find the cheapest and most attractive offers reserved for people with a high credit score.
And if your score is low, you might also have a hard time finding a cell phone deal, purchasing insurance, or even renting a house.
But how do you get a high credit score? And what can you do to improve a low score?
The good news is that you can check and monitor your credit score using free online services.
Find out how to do it and learn more about the steps you can take to increase your credit score with our quick guide.
What is a credit score?
Your credit score is a three-digit number that represents the value of your credit report.
It’s calculated using a points system based on how you manage your money – and the higher the number, the more attractive you should look to lenders.
The maximum number of points you can get depends on the credit reference agency making the report.
There are three main credit reference agencies in the UK: Experian, Equifax and TransUnion. Experian calculates your score out of a total of 999; Equifax’s best score is 700; and that of TransUnion is 710.
Either way, the closer your score is to that upper limit, the better your chances of being accepted for the best credit cards, loans, and mortgages.
What is a good credit score?
As explained above, what constitutes a good credit score varies between different credit reference agencies.
If it is a score calculated by Experian, it will be considered excellent at 961 or higher, good between 881 and 960, and just between 721 and 880. Anything below this level is considered bad. , which means that you are considered high risk by lenders and other institutions.
If Equifax sets your score, anything between 466 and 700 is great, 420 to 465 is good, between 380 and 419 is fair, and anything below is poor.
TransUnion’s credit scores are excellent between 628 and 710, good between 604 and 627, fair between 566 and 603, and poor between 565 and below.
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So I actually have three credit scores?
Yes, the three credit reference agencies will generally keep a record on you, which means you have three separate credit scores.
Which one determines whether or not a credit card or loan is offered to you will depend on the agency – or agencies – that the affected lender uses.
The good news is that credit reference agencies use similar information to calculate their scores, so any action you take to improve your score with one agency is likely to increase your score with others as well.
However, it’s still worth checking your three credit reports every now and then, just in case one has errors that don’t show up on the other two.
How can I get a good credit score?
It is not rocket science; the best way to get a good credit score is to manage your finances well.
For credit reference agencies and financial institutions, this means:
- Pay your bills on time
- Respect your credit limits
- Don’t Maximize Your Credit Cards
- Don’t make too many credit applications in a short period of time.
Example: With Experian, you will lose 130 points for paying a late bill and earn 90 points if you reduce your credit card debt to 30% or less of your overall credit limit.
However, it doesn’t all depend on how you manage your money.
If you’ve never borrowed money before, for example, your credit score will be low because there’s no evidence whether or not you can stick to a repayment plan.
And even if your financial history is impeccable, other factors can hurt your credit rating.
- Change address frequently
- Not to be on the electoral list
- Being a victim of fraud
- Do not spot errors in your credit report.
If your financial situation is related to someone with bad credit – for example a former spouse who goes bankrupt – your score may also be impacted, in which case you should ask the credit bureaus to apply a dissociation notice to make sure. may their future actions do so. not affect you.
How can I check my credit score?
You are entitled to one free copy per year of each of the three credit reports that the different credit reference agencies keep on you.
To claim them, all you need to do is visit the annual credit report website.
The reports you receive won’t show your actual score, but reviewing them is the best way to spot errors or areas where you can take action to improve your score.
To view your scores for free, you can sign up for a 30-day free trial for Checkmyfile. Remember, unless you cancel your subscription within the first 30 days, you’ll pay £ 14.99 per month for continued access.
How can I improve my credit rating?
Steps you can take to improve your credit score include:
- Check your credit report before applying for credit to avoid damaging it with rejected applications
- Register to vote, as it helps lenders confirm your name and address through the voters list
- Pay your bills on time – for everything from your cell phone to your council tax
- Take out a credit card for people with a low credit rating and pay it off in full each month
- Reduce overdraft or credit card balances you already have to reduce your “credit utilization rate”
How Do Lenders Use My Credit Score?
Lenders check your credit score to get an idea of your reliability. But credit scores are only one of the sources of information they go to when deciding to lend you money and at what interest rate.
They will also take into account any information you provide as part of your application, such as how much you earn.
And if the loan you are applying for does not meet their affordability criteria, it will not be offered to you, no matter how good your credit score is.
If you are an existing customer, or have been a customer in the past, they will consider this relationship as well.
Does a good credit score mean that I will always be offered credit?
Having a good credit rating undoubtedly increases your chances of seeing yourself offered top deals on credit cards, loans, and other financial products.
But companies are looking to make money. So, regardless of your credit rating, sometimes they can reject your application because they don’t expect to take advantage of you.
For credit card providers, the best customers are those who always pay on time but never completely clear their balance.
So if they find that you clear your balance every month or switch from one 0% card to another to avoid paying interest, you might find that your application is rejected despite your excellent credit rating.
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