Do you know what your credit score is? No? Well, you’re not alone, but getting to grips with that magic number is one among the most important things you need to do while managing your finances.
Your credit score may be a deal breaker for mortgage lenders and banks. Increasing this number can literally change your life.
What is a Credit Score?
Banks and lenders basically placed on a white coat and thermometer into your finances while you sweat over the results. Your creditworthiness is calculated using the financial information on your credit report (or credit file). minimal score means you may not be ready to borrow at all. If you do, you’ll likely pay higher interest rates.
What does your credit report say?
In your legal credit report you’ll find:
- A list of all of your credit accounts – including any credit, overdraft, or other credit agreements you currently hold or have previously held. The report also lists missed or late payments. This doesn’t include tax arrears from the Council.
- Your personal information (not your salary) and your current and former addresses.
- Details of all persons who are financially connected to you.
- Details of court judgements, home repossessions, bankruptcies, or repayment arrangements.
- Missed payments, arrears, etc. will remain in your file for 6 years .
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What is a decent Credit Score?
The three credit bureaus all use different systems. Here is an example of a good score on all three:
- Experian: Over 880 out of 999
- Equifax: Over 420 out of 700
- Call credit: 4 out of 5
Once you’ve got your score, you’ll join the cash Savings Expert Credit Club to seek out out what your chances of getting credit and the way much interest you would possibly be paying.
How low scores can make life difficult
Your score determines whether and how much you’ll be able to borrow, and how much interest the lender is probably going to charge you. Having made poor financial decisions in the past, didn’t get a loan, or defaulted on payments may result in an exceedingly low score that can really hinder your financial progress, especially if you need a mortgage.
When looking to borrow money for a mortgage, loan, or credit card, the lender can use the score to either decline loans or charge you a higher rate of interest .
While many find it counter-intuitive to charge poorer people more interest than wealthier borrowers, the logic for lenders is that low credit = high risk.
How To Improve Your Credit Score
It is a very good idea to check your score regularly and be clear about how you’re “seen” by lenders. If you’ve got a low or medium score (or no score!), look at our 10 recommendations on how to improve your credit score.
1. Register your vote
By simply registering to vote, the rating agency can verify that you are who you say you’re . Plus, you can have your voice heard by voting! Contact your local registration office for more information.
2. Check for errors
An incorrect address can affect your score. undergo your credit file with a fine-toothed comb and report errors immediately.
3. Start with credit!
Having no credit can be as bad as having a low credit because you’re an unknown quantity to the lender.
I know it sounds crazy, but once you are, you would like to “build” your bankroll. As? No, don’t take out ten credit cards today … instead, you can take out a prepaid loan builder card where you borrow a little amount and pay it out in full every month.
I’ll say it again: PAY IT in full every month. This creates a picture that you simply are a reliable re-payer. This works for those with a low score too. If you can get credit and show that you simply can pay it off every month, it means to lenders that you are a “reformed character”.
In any case, I strongly recommend that you destroy your card in the first month during which you can’t pay the remaining balance in full. Check out some cards at Money Saving Expert for people with little or no creditworthiness.
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4. Stay seated
If you keep moving, lenders will suspect that you are on the run from previous debt or unable to stay employment . If possible, stay at your address for as long as you can while you improve your credit score.
5. Pay off debts
One of the foremost obvious ways to enhance your credit score. If you pay off your existing debts before applying for a new loan, you’re more likely to get positive reviews from lenders.
6. dig up old plastic
If you have tons of credit cards that you aren’t using without credit, close the accounts and cut the cards in half. If you do not use these cards it’ll show the lenders that you simply don’t need to borrow. it’ll also clear your report of things you don’t use.
7. Be an honest payer
Pay all of your bills on time and fully . This is the most obvious tip, but showing that you are reliable and able to pay your bills and balance on time for an extended period of your time will increase your score in the end of the day .
8. Finish the application
Every loan application is logged in your report. Applying for a wide variety of credit cards and loans can leave you feeling desperate, which successively leads to lenders coming up with an extended bargain. Use online eligibility calculators to check what you can get before applying for credit. These searches don’t affect your creditworthiness.
9. keep one’s distance from ATMs
Don’t withdraw cash from any of your credit cards, lenders do not like this at all. If you’re not abroad, they do not mind.
10. Check your score
Check your score regularly so you recognize how you’re progressing and so you can check for mistakes.
Did you manage to improve your credit card rating? Or are you currently suffering with a low score? let us know here, we’d love to hear from you!