What is your Credit Score and why is it important?

Your credit score is what makes you attractive to lenders, who use it to decide whether to lend you money and how much you can borrow. According to Experian, a credit score of 700 or above is generally considered ‘good’, with 800 or above being perceived as ‘excellent’. If you are money-savvy enough to be rewarded with a high score, creditors will be more confident that you will repay your future debts so you are more likely to be accepted for a mortgage.

So far so good, but what if your credit is looking a bit rubbish? Before we start, let’s take a quick look at some of the reasons your credit score may be bad:

Why is my credit score bad?

  • High level of debt – applying for a mortgage is a huge debt in itself, so lenders would be wary of over-stretching you.
  • Bad payment history – missed or late payments may stay on your credit file for six years, especially if you have a county court judgement (CCJ) made against you. These include loans, credit cards, even your phone or utility bills.
  • Open credit card accounts – got a credit card with a hefty amount available but never used? Lenders actually look at how much you could spend not just how much you have spent!
  • Moving home – are you constantly on the move? Lenders will feel far more comfortable if they see you can stick to one place for longer.
  • The Electoral Register – even if you are adamant you won’t vote in the next election, it’s still vital for you to be on the Electoral Register as proof of identity.

How can I fix this?

There’s plenty of ways you can get back in the game when it comes to your credit score. Don’t worry; we have some top tips to make sure you get back on track!

  • Get on the Electoral Register – this is so quick and easy to do yet often over looked by wannabe home owners. Simply head to UK to sign up – simple!
  • Keep on top of your file – Before you head to the mortgage adviser, sign up to a free credit check website. We recommend Experian or Clearscore who not only let you know how well your credit is looking but is also packed with helpful tips and advice to improve it.
  • Tidy up your accounts – Do you have any unused credit or store card accounts just sitting in your bank account? Make sure you pay off any outstanding balance and close them. As mentioned above, lenders will be looking at the credit limits that are available to you, not just how much debt you are in. Also, make sure you ring your phone and utility companies to ensure that you are not currently paying over what you should be, or have any open accounts that are no longer being used.
  • Don’t miss any repayments – We cannot stress this enough! Defaulting on a loan or simply missing a phone bill can cause a black mark on your file. If you have a history of missed payments that were beyond your control (such as a company error) you can speak to your credit provider to see if they can remove the mark.
  • Pay off your debts – This is a no brainer really but taking control of your debts really shows that you are in control and savvy at managing them. Also, make sure you pay off over the minimum amount required each month lenders will definitely start looking at your more favourably.
  • Build up your credit – you can’t have a credit score without some credit, so build up your credit history with a credit building credit card. Just make sure you spend a little on it every month and pay it off in full.

Do you have any other top tips for improving your credit rating? Share your knowledge in the comments below!

 

Image Credit: Pixabay

 

 

 

 

 

 

About the Author

First Home News
The First Home News Editorial Team is made up of professional and amateur writers including several team members from our digital PR and social media specialist Prohibition.

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