Often, people grumble about missing out on opportunities because of a low credit score. Accessing financial products like loans and credit cards becomes tough for them. Time and again, financial experts have stressed the importance of maintaining a good credit rating for cheaper borrowing. Although your rating may not be in very good shape at the moment, there is definitely scope for its improvement. But first, you need to understand the basics of credit score. In this post, we cover:
- What is a credit rating?
- Can I check it free of cost?
- How is a good credit score determined?
- Tips to improve my credit score
What Is a Credit Rating?
On the basis of information in your credit file, otherwise known as a credit report, every UK citizen has a number. This three-digit number can affect whether lenders will like to lend to you, how much they’ll let you borrow and how much interest you’ll pay. Every lender views credit scores differently, so you may qualify with you and not the other. Though credit files store transactions upto six years, lenders will take interest in your current financial situation. If your report shows a few delayed or missed payments, your credit score is likely to be low. It can show you as a “high-risk” individual and make insurance and mobile contracts inaccessible. It’s a sound idea to regularly check your report for errors or fraudulent activity.
Can I Check It Free of Cost?
Credit files are kept by three main Credit Reference Agencies (CRAs) in the UK, namely Equifax, Experian and Callcredit. You can request for a full paper copy of your credit report or simply get an online version. Going through these agencies may cost some charges, but it’s for free on their partner sites.
CRAs also offer membership schemes by which you can always be up-to-date with changes to your credit score. Some also offer access to agents who can help with advice. Remember if you’re on a free trial and don’t want to pay the monthly subscription, cancel before the trial ends.
You legally have a right to look at a copy of your credit report for no charges whatsoever. You can request this from any credit reference agency that holds your credit details.
How Is a Good Credit Score Determined?
A credit score may be good or bad depending on a particular lender. However, if it’s good with a CRA, then you can mostly set aside worries about lenders. At a glance, a good credit score with
- Equifax scores 420 on 700
- Experian scores 880 on 999
- Callcredit scores 4 on 5
Good credit behaviour like making on-time payments gives rise to a high credit rating. So, the longer a bill goes unpaid, the severe effect it’ll have. Most negative marks remain on your credit file for a maximum of six years.
Tips To Improve My Credit Score
Follow these simple tips to see a change in the way lenders view you.
- Register on the electoral roll:
It’s like an identity proof that projects a borrower as trustworthy.
- Check for mistakes:
A paid bill might still show as unpaid or your address may be incorrect. Take care of the small things and report any errors immediately.
- Pay your bills on time:
Paying bills for your phone or internet connection shows that you are capable of managing your finances effectively.
- Check for links to other people:
If you have a joint account with your spouse or are linked in any way to a person with a poor credit score, loans may be hard to come by.
- Keep a watch for fraudulent activity:
Any suspicious behaviour like a credit request which you didn’t make must be brought to the notice of the CRA immediately.
- Avoid CCJs:
County Court Judgements can severely dent your credit score. If you have debt management issues, get free advice from an expert or online.
- Eliminate high levels of old debts:
Before taking on new credit, consider clearing off past debts else banks, building societies and credit card companies may be hesitant to lend.
- Don’t change houses often:
If you change your address frequently, lenders might think you’re doing it to evade creditors.