When it comes to taking out a loan with a lender, your credit rating becomes increasingly important, and the better the rating the better chances you have of being successful. But what is a good credit score? And how can you improve upon a poor rating?
Taken from our downloadable eBook: Improving Your Financial Health: 8 Money and Credit Management Tips, our How to Improve Your Credit Score – What is a Good Credit Score and Why Does it Matter guide highlights a number of valuable tips for ensuring your finances remain in great shape.
What is a good credit score and Why Does it Matter?
As a record of your financial history, a credit score provides a lender with a snapshot of your borrowing to date. And a good credit score is likely to see a lender have more confidence when deciding to offer you a loan or not.
In the UK, there are three main credit referencing agencies; Equifax, Experian and Noddle who all give a different value to what they might consider as a good credit score.
- Equifax gives a rating of 660 and upwards to scores that are noted as good.
- Experian considers scores of 700-800 as good, with any ratings above that being excellent.
- Noddle gives a rating of 3+ and higher to those credit scores it considers as good.
Tips to improve your credit score
If you’ve recently found out that you’ve got a low credit rating and want to find out how to improve your credit score, you needn’t worry. There are plenty of steps that you can take to build that rating back up.
- Register to vote: One of the first things lenders look for is whether or not you are registered on the electoral roll. Lenders will often use this to see how long you have been at an address with a longer time period often indicating a more established, and reliable, applicant.
- Pay bills on time: Missed payments will often be recorded on your credit rating and repeated missed payments will negatively affect your score. However, continually paying your bills on time will often indicate to a lender that you are a reliable borrower and will prevent that rating from dropping.
- Close down unused accounts: When checking to see your suitability, lenders will look at all your previous credit accounts, so even if nothing is owed, it’s best to close them down. It’s also worth making sure that you are not linked to a joint account with another person that you no longer should be. If you have ever had a shared account with someone with a poor credit score, then your rating may also be affected simply by association.
- Show financial responsibility: Alongside paying your bills on time, ensuring you don’t have any outstanding debt and regularly staying within your credit limit are key ways of keeping that credit score from falling.
- Limit your credit applications: Whenever you make an application for credit, you leave behind a ‘footprint’ on your credit report. This ‘footprint’ can be seen by any lenders checking your history and too many applications can make you seem desperate, ultimately leading to a higher chance of rejection.
- Check your credit report regularly: When you first get your credit report, it’s important you check it to see that all the information held on you is accurate. It’s then worth checking it on a regular basis, roughly about once every year, to make sure that the information held on you continues to be correct.
Why is your credit score important?
Having a good credit score means more than just being able to take out a loan or get a new credit card. It can affect much more than you think. Your credit score influences almost all of the other financial commitments in your life – such as mobile phone contracts, car insurance, or applying for new bank accounts. It makes sense to find out what your credit score is, and then take some simple steps to make it better. It’s a lot easier than you think, and a small effort could lead to some major changes.
Being informed on your credit rating and knowing how to improve your credit score should you need to can all help to improve your financial standing. If you want to learn more great money saving tips, then download our eBook Improving your Financial Health: 8 Money and Credit Management Tips now.
Alternatively, if you have a question and want to get in touch, you can contact Uncle Buck at firstname.lastname@example.org