LOQBOX Learn: Your credit score explained
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. And lockdown needn’t stop you.
What’s a credit score?
Your credit score is a tool used by lenders to help them figure out whether you qualify for products like loans, mortgages, credit cards or phone contracts. This score is influenced by factors in your credit report. Lenders like applicants who are ‘low-risk’, so the higher your score, the more likely you are to get cheaper rates.
What affects your credit score?
A number of things make up your credit report and impact your credit score:
- Personal information including your name, date of birth and address
- A history of credit account payments
- How much available credit you’re using and your total debts
- Credit searches carried out when you apply for credit (e.g. a credit card)
- Public records including electoral roll and county court judgments (CCJs)
Why is your credit score important?
With lenders expected to tighten their criteria during the uncertainty of coronavirus, a healthy credit score is more important than ever. When you need to borrow, it’ll make you a safer bet for lenders, meaning you’re less likely to be declined. A better score will also help you get better APR rates to make your repayments cheaper.
How do you check your credit score?
There are three main UK Credit Reference Agencies (CRAs) – Experian, Equifax and TransUnion – and each owns a separate credit report about you. Differences between your three reports can damage your chances of getting credit, so it’s best to check all three.
It’s free to check your credit reports online using the following services:
- ClearScore (uses Equifax data)
- Credit Club (uses Experian data)
- Credit Monitor (uses TransUnion data)
How do you build your credit score?
- Make yourself visible to the system (if you aren’t already) by contacting the CRAs or getting on the electoral roll
- Fix any mistakes on your credit reports by filing a notice of correction with each CRA or by getting in touch with them
- Regularly monitor your score and check for fraudulent activity
Building to a better score
- Pay all your bills on time to prove to lenders you can consistently repay your borrowings
- Limit how many credit applications you make
- Keep your credit use low to prove you can manage credit
- Thought about LOQBOX? The clever way to build your credit score while you save.
Save your way to a better credit score with LOQBOX
- Boost your credit score to get better rates on loans, credit cards and mortgages
- Grow a savings pot that’s there when you need it
- Get access to helpful tools and tips to better your finances
- Start by saving as little as £20 a month
Transparency is important to us, we choose our partners very carefully, and only present financial products we think will work for you. If you sign up to ClearScore using the above link, then they will pay us commission for this.
This post was written and compiled by the credit experts behind LOQBOX – a completely free way to build your credit history by saving as little as £20 each month. To sign up or read more about the clever way LOQBOX works, head to LOQBOX.com.