Your credit score is a significant piece of information in your financial life. It's what credit lenders and providers look at before approving you for loans, credit cards or other amounts. Luckily, there are many ways to make this score look good.
In this blog, we'll teach you what your credit score is, why it matters and how to increase your score quickly.
Quickly, what are credit scores?
Your credit score is between 1 and 1,000, which tells lenders how likely you will pay your bills back on time. The higher the score, the better.
Your score comprises a bunch of different information that gives potential lenders a good look at your borrowing history (and hopefully includes you paying your bills back). Your score covers things like:
- How much credit do you have out, and how long you've had it.
- Any missed repayments or defaults.
- Court judgements against you.
- And any other payment activity.
What does my score mean for me?
Your credit score plays a significant role in your ability to take out credit and loans in the future. That's because banks, financial institutions and other lenders all check your score any time you apply for a loan.
A low credit score means lenders might turn you down for a loan. If they do accept your application, you're likely to face higher interest rates, to make up for the risk that you might not pay the loan back.
It's not just the banks that care about your score. Did you know that your electricity, water and even phone companies check your credit score before providing you with their services?
Your employer might ask to carry out a credit check on your job before hiring you. Some landlords even take your credit score in to account before allowing you to rent a place.
Are there any benefits to a good credit score?
A good credit score makes it easier to negotiate better deals from lenders. You're also likely to get better offers, like lower fees or interest rates, and you might even get rewards from your bank, insurance company or utility providers.
Can I start growing my score now?
Unfortunately, your score will not change by hundreds of points overnight. That doesn't mean it's not worth making an effort. Anything worthwhile takes time to develop.
Plus, since your credit score is based on how financially responsible you've been, you'll probably get your bank balance looking better too by taking steps to boost your credit score.
Pay those bills back on time.
When sorting your credit score, one of the most important things is to make sure all your bills are paid back on time and in full — payment defaults can stay on your file for up to five years.
The good news is that your credit history also includes 'positive credit reporting'. That consists of any payments you've made on or ahead of time and even overpayments.
Make sure your credit report is accurate.
Everyone messes up, including credit reporters. Credit reporters are the ones who generate your credit report for you (which you can view on Yonda).
Any minor mistakes credit reporters make can affect your credit score. That's why it pays to take the time to check out your credit report and ensure it's free of issues.
See a default that you know didn't happen? An application for credit that you never took out? Take it up with the provider of the credit reporting company. They're required to fix mistakes you point out, and your credit score will thank you.
Credit scores are quickly ruined by a failure to pay bills on time, but they're also raised when you make repayments.
If you know all this and your score is still going down, check your credit report is accurate. Occasionally, even credit reporters can mess up. That's why it's a good idea to scrub up on credit terminology by reading blogs like this one.