A good credit score is a key that unlocks access to credit cards, mortgages and even smaller value services such as mobile phone contracts or buy now, pay later offers.
If you're applying for a loan or another financial product and you don't know what your credit score is, then you're potentially playing with fire. That's because every search made on your credit record is recorded. If you are rejected for a product and have to apply for another, both searches will show up on your record. Banks don't like it when there is evidence of multiple searches on your credit record because it makes you look like you could be desperate for credit. In order to avoid this, the first step is to find out what your current score is.
There are a number of websites that allow you to check your current credit score free of charge. These include Experian and ClearScore. There are also a few websites that charge for these services. In some cases, this may be good value as they bundle in additional services such as identity fraud insurance. However, if you're just looking to keep an eye on your credit score, then one of the free sites should be fine.
Most credit score checking websites will give you a number between 1 and 999 when you check your credit score. However, not all of them will help you to understand what that means. While there are no hard and fast rules and every lender is entitled to make their own decisions when it comes to lending money or providing credit, in general, the higher your score, the more likely you are to be accepted for credit. As a rough guide, however, this is what the scores mean.
900 or more: You're likely to be accepted for most credit cards and loans that you apply for and will generally be offered competitive interest rates. Be sure to shop around before applying for any financial products as lenders should be queuing up to offer you the best possible deals.
800-899: A fairly good score. The very best products on the market may not be available but you should still be able to access credit relatively easily, although the rates you pay may be slightly higher than someone with a rating over 900.
700-799: A fair credit score. You will probably not be offered the lowest rate of interest from a lender, but few will be off limits to you. It may be harder for you to obtain balance transfer deals and other introductory offers on consumer finance products such as credit cards.
600-699: Access to mainstream credit may be tricky. You probably will be able to obtain credit cards, but you will most likely be offered a low credit limit and a high rate of interest.
599 or under: At this level, you may find it hard to access credit at all. Focus on improving your score and paying back any existing loans and obligations before you start applying for more.
Now that you know what your credit score is, the odds are that you will be looking for ways to improve it. Building up your credit score is a process that can take a while but there are a few things you can do to start improving things now.
Set up direct debits on all of your credit cards: This means that you don't run the risk of missing a payment on your card, which can often lead to black marks on your credit report and issues obtaining credit in the future.
Pay more than the minimum payment each month: Banks don't like it if you consistently pay only the minimum on a credit card each month as it makes it look like you are barely keeping your head above water financially. If you can pay more than the minimum, you should do so. Even if you have a large amount of debt to clear, showing financial services providers that you are in control of your loans is always a good start.
Pay off a credit card entirely: The number of credit cards you have is a red flag for lenders. If you can, focus on paying them down one at a time, then closing the account down completely. Gradually rationalising your finances will help to improve your overall score.
Look for a balance transfer deal: If your credit score is good enough to allow you to apply for a new card, then look into a balance transfer offer from a credit card company. These allow you to avoid paying interest on money that you have already borrowed for a set period of time. This means that you can spend your money on paying down your debt instead, reducing the amount that you have outstanding and helping you to improve your score in the long-term.
Overall, being in control of your finances and being aware of what's going on can make a huge difference to your score. If you bury your head in the sand and ignore letters from banks, credit card companies and other lenders, you are far more likely to wind up in trouble. Even if your credit score isn't great at the moment, there are things that you can do to make things better. Everything you do to improve your score will make it easier for you to access credit in the future. While it may not be the best score out there, someone with a credit score of 750 will receive much better offers from banks than someone with a score of 650.
Understanding and improving your credit score is a key part of managing your finances, start working on it today and you'll set yourself up for a far better financial future.
Ready to look for your dream home?