There’s no truer sign that you’re a grown up than worrying about your credit score. Thankfully it’s one of the more simple aspects of financial ‘adulting’ to get your head around. Whether you’re keen to find out your current score or looking to build yours up, here’s the lowdown on how to get on top of it.
Overview
What Is a Credit Score?
Your credit score is a number that reflects your financial trustworthiness. There are three credit reference agencies in the UK that provide these scores (Experian, Equifax and TransUnion). This rating is a high level indicator of the contents of your credit report. This report is assessed by companies who you wish to borrow money from in order to check that you’re likely to pay them back.
What Do I Need a Credit Score For?
Having a good credit score is important when you are looking to borrow money. Higher scores will allow you to borrow more and at lower interest rates. Once you’ve submitted a request to borrow money, companies conduct an electronic credit check to check if you meet their eligibility requirements. This happens behind the scenes when applying for new credit cards, loans, mobile phone contracts, bank accounts, utilities and some forms of insurance. If your score is not high enough your application may be denied.
Credit scores are also key to the most important loans for most of us – mortgages. A high credit score will make you a low risk borrower. This allows you to maximise the chances of keeping your dream property within reach.
How Can I Check My Credit Score For Free?
It’s important to keep tabs on your credit score and one of the easiest ways to do so is via the Noddle credit report. This service updates on a weekly basis and sends monthly notifications to inform you of the latest status.
Another option is the MSE credit club. Along with displaying your Experian credit score it also shows your chances of being accepted for certain financial products (for example travel credit cards). In addition, it highlights any aspects of your credit file which lenders may view as negative.
If you haven’t had much experience with credit cards you may be surprised to find that your score is quite low. Lenders use historical patterns to assess future reliability, so it’s only through proving that you can responsibly borrow money that your score will increase.
How Can I Increase My Credit Score in the UK?
Register to vote – One of the easiest ways to increase your credit score is to make sure you’re registered to vote. Not eligible to vote in the UK? You can provide the three credit reference agencies with proof of residency (UK driving license, bills) and request that they add a note to your file.
Stay on top of payments – This isn’t a quick fix, but it’s important not to delay or miss any repayments to your current lenders.
Avoid withdrawing cash on credit cards – It’s easy to forget but you should always avoid withdrawing cash on your credit card. Lenders see this as a sign of poor budgeting. The one exception is if you use a travel credit card to withdraw money overseas.
Build/rebuild credit history with easy accessible credit cards – If you have a low/average credit score you may find applications rejected for many of the best credit cards. Each time you apply a mark is made on your credit report and you may even find these marks themselves start to count against you. To avoid this it’s best to use the Money Saving Expert eligibility calculator as a useful source of working out what you can qualify for. This will also help you to find any credit cards that can help you to build/rebuild your rating.
Digitally track rent payments – Thanks to the Rental Exchange Initiative regular rent payments can now be used to improve your Experian credit score for those in both private and social housing. Click here to find out more.
Whether you’re looking to secure a mortgage (or after a credit card with the best perks,) hopefully the tips above will allow you to start increasing your score. Best of luck!
Were you surprised by your credit score? Let me know in the comments!
