An individual’s credit score has a huge impact on whether or not they can borrow money to buy big-ticket items like a home or a car. The score can also be considered important when discussing employment options and one’s ability to acquire consumer products such as mobile phones.
Below are several reasons why you as a consumer should take a closer look at your credit score.
How Obtaining Credit Affects You
A good credit score can affect your life in many different ways. Individuals with good credit scores gain access to credit much easier than those with bad credit scores. Those with good credit scores often receive preferential rates.
Here is a good example; when a personal loan is offered at an interest rate of 3.5% per annum, the advertised rate is not always available to all successful applicants. Those with the best credit scores often receive their loan for the advertised rate because they are viewed as presenting the lowest risk to the lender.
Growing in Importance
Credit scores play a great role in an individual’s financial life. This is why they’re so important and now they are projected to have even more relevance in a variety of areas because of the rising levels of debt in the UK.
With this in mind, individuals should seek to improve their credit scores since it might become very rewarding in the long run. Good credit has the potential to become the key to good loans and more favorable rates. It promises to affect one’s ability to obtain employment or purchase consumer products.
This is the best time to work on improving your credit score.
How Can I Keep Track of My Credit Score?
Equifax and Experian are the two major credit scoring agencies in the UK. They all have access to your credit information which lenders often examine. Basic errors can cause you some problems, therefore you are advised to look through your credit reports once every year.
Equifax and Experian allow you to check your credit report free of cost.
How Much Time Do I Need to Improve My Credit Score?
Your credit history improves slowly as you make more on-time payments. When you leave bills unpaid for a long time, your credit score is affected. Monitor your credit score closely to spot problems.
All negative strikes remain on your record for about six years before everything is wiped off. Negative strikes include missed payments, defaults, bankruptcy, and CCJs.
Here’s How to Improve Your Credit Score
The tips below offer insight on how to improve your credit score.
- Prompt bill payment: Paying your bills on time is one of the best ways to show lenders that you can manage your finances.
- Are you linked to another person: When you’re linked with a family member or friend through a joint account, their own credit has an impact on yours, especially when they have a poor credit rating.
- County Court Judgments (CCJs): Avoid county court judgments for debts because they often have a great negative impact on your credit score.
- High level of existing debt: You are advised to pay off all existing debt before taking another loan. Most financial institutions will be reluctant to lend you money if you already have a huge outstanding debt.
- Keep credit utilisation at a minimum: Credit utilisation refers to how much of your available credit limit you use. An example is someone who has a credit limit of £2000 and uses £1000 — has used 50% of their credit limit. Lenders view underutilisation of credit limit positively. If possible, keep yours at 25% or lower.
- Get your name on the electoral roll: Those who aren’t registered with the electoral roll may find it difficult to obtain credit. You can find the registration process online.
- Don’t move homes too often: Lenders will view you more positively if they find that your current address has been the same for a long time.
