What is a credit score?
Your credit score is calculated by a credit reference agency, based on the information in your credit file. Credit reference agencies hold information on every UK borrower, including; electoral roll information, any previous credit applications, any history of debt (including County Court Judgements and bankruptcies) and your credit behaviour.
There are three credit reference agencies in the UK – Experian, Equifax and Call Credit. Each credit reference agency calculates your credit score differently. However, they all show lenders how likely you are to be accepted for credit.
How can I view my credit score?
You can check your credit report and find out your credit score online. Free trials are available from Clear Score (Equifax) and Noddle (Call Credit). These services will inform you whether your credit score requires improvement to increase your chances of obtaining credit.
Can I boost my credit score?
If you need to improve your credit score, there are steps you can take to give it a boost. Here are a few of our top tips:
1) Register on the electoral roll
Lenders use the electoral roll to confirm you live at the address you provided on your finance application. If you are not on the electoral roll at your current address, it is unlikely that lenders will allow you to borrow money.
2) Make sure you pay your bills on time
A missed payment can have a very damaging impact on your credit score, so paying your bills on time is a must. If you are struggling to make your monthly repayments, speak to your lender as you may be able to come to an agreement with them.
3) Consider your financial links
Make sure you are not financially linked to someone who has a poor credit score. Do not take out a joint bank account or joint finance with a partner if they have a poor credit rating.
4) Build up a credit history
If you have a thin credit file, for example; if you are a student, you may need to build up your credit history. Taking out a mobile phone contract or a credit card can be a simple way to improve your credit score. However, you must ensure you make your payments every month.
5) Avoid multiple credit applications
Making lots of credit applications in a short space of time can be a red flag for lenders. This is because it can suggest anything from fraudulent activity on your account to applying for more credit than you can afford. If you do get rejected for a loan or credit, don’t apply again immediately as it can reduce your score.
If you are applying for credit, use a broker like Aro, who can search over 50 lenders to find the right loan for you without impacting your credit rating.
The above post does not constitute as financial advice and is intended to be informative.
Want to know more about how credit scores work? Check out our blog, 5 credit score myths you should know about.