Maybe not now, but there’ll probably come a time sooner or later when you need to buy something on credit — whether it’s a phone contract or a mortgage. Getting your credit score in the best shape possible will help make sure you won’t be disappointed when it’s time to borrow.
Credit scores are a tool used by people to help them figure out whether they’ll likely qualify for products like loans, mortgages, credit cards or phone contracts. It’s important to note that lenders won’t use this score when they make a decision to lend to you. Each lender will actually have their own scoring system to help them decide. But to give you an indicator of how likely you might be to get approved for credit, each of the Credit Reference Agencies give you a credit score. And it’s helpful to know this before applying for credit.
In the UK, there are three main Credit Reference Agencies: Equifax, Experian and TransUnion. Each of these agencies creates a credit score for you (so you actually have three credit scores, not just one).
Your scores are influenced by factors in your credit report. Lenders like applicants who are ‘low-risk’ which means that the risk that an applicant won’t pay them back is low. So the higher your credit score, the more likely you are to get cheaper rates.
A number of things make up your credit report and impact your credit score:
When you need to borrow money, having a good credit score will indicate that you’re a safer bet for lenders, meaning you’re less likely to be declined. A better score will also help you get better interest rates which will make your repayments cheaper. This could save you £1,000s on things like credit cards, loans and mortgage rates.
Like we mentioned, there are three main Credit Reference Agencies in the UK. Differences between your three credit reports can damage your chances of getting credit, so it’s best to check all three.
It’s free to check your credit reports and scores as often as you’d like to and without damaging your scores using the following services:
* For transparency, if you decide to sign up to ClearScore using this link, we’ll receive a small commission.
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