The Importance of Keeping Your Credit Score High

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Especially if you own a business, it is important to keep your credit score high. Your credit score is part of your wider credit history and report. What’s more, lenders factor it into their decision when you apply for credit with them.

To see your credit score, you can request your credit report from one of the three Credit Reference Agencies in the UK. These are Experian, Equifax and TransUnion. Each bureau uses a different scoring system. For example, Experian scores you out of 999, while Equifax scores you out of 700. Therefore, a score of 500 means different things with each one.

These agencies work with lenders to compile your credit history. They detail all of the financial products you’ve taken on such as loans, credit cards and mortgages. They keep track of how much you borrow and how you repay.

 

RELATED ARTICLE: BUSINESSES NEED GOOD CREDIT TOO: 5 TIPS TO BUILD YOUR BUSINESS CREDIT

 

Access Your Credit Score for Free

You can access your credit report for free through a service such as ClearScore or Noddle. These services show you your credit score. They also provide you with full details of your credit history. This can help you to understand where you might need to improve things.

It’s a good idea to keep tabs on your credit score. This will give you an idea of how good you look to lenders. A perfect or good score indicates that you’re adept at managing your money and repaying what you borrow. This increases your chances of a lender approving your application for a credit product. Moreover, it also means you could get a better rate.

 

Your Credit Score Can Affect the Prices You Pay

If you keep your credit score high, you can get lower prices for your insurance. That’s because, insurers perform a credit check when you apply with them. If your credit history reveals some problems, your policy may cost more.

A good credit score also allows you to handle emergencies effectively, should you need to borrow money fast. The better your score, the more likely it is you’ll be accepted for a payday or short-term loan to cover an emergency cost. This can allow you to tackle the issue quickly. Then you can handle paying it back when your cash flow improves.

 

How Is Your Credit Score Determined?

If you’ve never borrowed money before, you may be surprised to discover that your score isn’t particularly high. This is because your score is based around your history of borrowing and paying back what you owe. However, if you’re starting from scratch, you might want to consider applying for an overdraft or credit card. These cards can help people in your situation. That’s because they come with a small limit. Commit to repaying your card in full each month. This will show lenders that you can borrow responsibly.

 

Who Might Check Your Score

Other entities besides insurance companies can also check your credit score. For example, you’ll be glad you have a good credit score when you put in an application for a mortgage to buy a house. The same will be true when you apply for certain types of employment or if you want to take on a mobile phone contract. This is why it’s so important you keep your credit score high. It affects many aspects of our lives.

 

Here’s What to Do if You Need to Improve Your Score

If you need to improve your credit score, there are a few ways to do this:

• Look to Rebuild Your Score over Time with Small Amounts of Credit

Borrowing small amounts when needed is a good method. That’s because you take on lower amounts of credit and pay this off quickly. Many people do this with a credit card. They use their card to pay for gas for their car or for travel expenses. Then they pay it off at the end of the month. This proves you can borrow responsibly, improving your score steadily over time.

• Consider a Bad Credit Loan

This guide on bad credit loans from Sunny looks into these in detail. However, essentially bad credit loans are designed to give people with a less-than-perfect credit history an opportunity to demonstrate they can borrow responsibly. This gives them a chance to get back on the path to having a good credit score. Bear in mind that the interest will be higher on these loans.

• Ensure the Details on Your Report Are Correct

An incorrect or missing address or a fraudulent account on your report can cause more damage to your score than you might think. Moreover, if you’re a citizen of the UK, not being enrolled on the electoral register can also negatively affect your credit score.

• Pay All Bills on Time and in Full

A good track record of payments, even if you’ve had issues in the past, can improve your score. It shows lenders that you can manage money responsibly.

 

It’s Important to Keep Your Credit Score High

It’s important you keep track of your score and work to improve it if it is lower than you’d like. How long it takes to improve depends entirely on your credit history. For example, if you’ve missed a single payment you should be able to recover quickly. However, if you’ve defaulted on a credit agreement or a creditor has obtained a court judgement against you, you could have trouble getting your credit score high again for several years.

Whatever the case, a credit score is always recoverable. Moreover, it’s something to look into. That’s because the day will come when you may need to borrow money again.

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