Your credit score is the most important part of your financial portfolio, you can have an abundance of assets, properties and investments, but if your credit score is low, you won’t qualify for any further credit. If you want to know more about your credit score, keep reading.
A High Score Equals Low Risk
When applying for a mortgage or a credit card, the first thing that a lender is going to do before they even speak to you is check your credit file. The information available to lenders will help them to determine how much interest you are going to pay or whether they will accept or reject your application.
Applicants with a high credit score are seen as less risk and lenders feel confident about extending them credit. It is also important to note that all lenders are different, they don’t all follow the same policy, which means you might get rejected by one lender but accepted by another. Therefore, in the unfortunate event that you are not approved, don’t stop at the first hurdle, apply again. However, you should also be aware of the fact that your credit is negatively affected if several searches are conducted within a short period of time.
What is a Credit Report?
When you apply for a line of credit such as a credit card, a mobile phone or a mortgage, lenders will contact one of the credit reference agencies and gain access to your credit report. The information included on this report includes the following:
- • Your current and previous address details
- • Whether you are on the electoral roll
- • Your credit agreements such as loans, overdrafts, credit cards and mortgages
- • Public records such as insolvencies, bankruptcies, and any judgements that have been applied to your name from the courts
- • Your financial associates, this includes people you have taken out joint credit with
Things That Can Affect Your Credit Score
The information that is recorded on your credit file will affect your score. There are a number of different factors that can influence your score, these include the following:
- • The total amount of your debt and how much of your available credit you are using
- • Your ability to make payments on time
- • The number of times you have made a credit application
- • Information available to the public such as judgements from the court and whether or not you are on the electoral role
Steps to Improve Your Credit Rating
The good news is that if you have got a bad credit score, or you don’t have any credit, there are several things you can do to improve your score:
- • Sign up to one of the credit reference agencies so that you can keep track of your score and ensure that all the information on your file is up to date and accurate
- • Make all your payments on time
- • Close any credit accounts that you are no longer using because some lenders will hold it against you if you have a large credit limit
- • Apply to have your name put on the electoral roll