Lifestyle

Everything you need to know about your credit score including how to check it


Checking your credit score is easier than you think (Picture: Ella Byworth for Metro.co.uk)

Credit scores are the ultimate letters of recommendation – they tell lenders how reliable you are.

Unlike a character reference though, credit scores look solely at numbers – debts and how many loans you’ve taken out (sadly, your willingness to help a friend move home does not count).

You might not be thinking about your credit score too much (owning a home seems to be a pipe dream, after all) but it’s important to know how your spending habits affect it, should you eventually need to borrow credit.

Whether you want to take out a credit card, a personal loan or a mortgage, the first thing a lender will do is check your score.

The higher the score, the more likely are you to be accepted as a borrower. But there are different systems and different scores.

So what does it all mean?

This month on Metro.co.uk we’re looking at debt and all things money. So for those who’ve been meaning to check or too scared to look, here’s how to check your credit score.

What is a credit score?

Your credit report is put together by companies known as credit reference agencies (CRAs). There are three in the UK: Experian, Equifax, and TransUnion who create your credit reports.

These CRAs gather information on your borrowing history, calculate a score based on this and then create a report – a credit file.

Lenders then ask one of the CRAs about this information before accepting your application.

James Jones, head of consumer events at Experian tells Metro.co.uk that your credit score is your financial CV.

He explains: ‘We collect information from banks and lenders and 500+ companies and piece it all together.

‘We also look at court judgments and the electoral register for details (whether you’ve registered to vote), and your financial record from the last six years.

‘Based on that, the rating figures out the likelihood of you making future payments.’

How do I check my credit score?

Thankfully we live in tech-savvy times so checking these things is super easy. You can do it on a browser or download an app that gives you a score within seconds for free.

While you can check with the three main CRAs Experian, Transunion and Equifax, there are other companies that offer the service.

Money Supermarket, for example, will show you your score and help you find the cards you’re likely to be accepted for.

What’s a good credit score?

Of course, this is the most important part. After all, you want a high number. While the higher it is, the better, not all scales are the same.

A good Experian score starts at 700, with 800 considered excellent while Equifax says it’s 660 and above. Whichever one you choose to use, it will tell you where you are on the scale.

What is a good credit score? (Picture: metro.co.uk/ mylo)

How do I improve my credit score?

If you have a low rating or just want to take it as high as possible then there are some things you can do to improve it.

Some of these things include: paying your bills on time, paying down debt (reducing your credit card balance), making outstanding payments, and limiting new credit requests.

Simple things such as registering to vote can add up to 50 points. A perfect payment record for several years can add 200 points. On the other hand, missing payments can cost you 130 points.

Money Supermarket might tell you how to improve your rating (Picture: Faima Bakar)

Does checking my credit score affect it?

This is not true.

James from Experian tells us: ‘You can check as often as you like, it has no impact. What affects it is if you’re applying for lots of different credit (i.e several credit cards) because each time a lender has to run checks (leaving a ‘hard footprint’).

‘If you’re applying lots, it indicates thirst for new credit. Applying to borrow lots of different things can cause problems. How likely are you to pay these things back?’

If you check your own score or when a lender or credit card company checks your credit to pre-approve you for an offer (known as a soft enquiry), it does not go on your credit report nor affect your score.

And it’s only the bank or the lender that decides to approve credit, not CRAs such as Experian.

Who checks my credit score?

The broad answer is anyone who’s lending you something. More specifically, that’s landlords and utility companies, credit and store card providers, mobile phone contract providers, car insurers and even your employers.

So go forth and spread your credit knowledge.



Debt Month

This article is part of a month-long focus in November all about debt.

Scary word, we know, but we’re hoping if we tackle this head on we’ll be able to reduce the shame around money struggles and help everyone improve their understanding of their finances.

Throughout November we’ll be publishing first-person accounts of debt, features, advice, and explainers. You can read everything from the month on the Debt Month tag.

If you have a story to share, a topic you want us to cover, or a question that needs answering, get in touch at MetroLifestyleTeam@Metro.co.uk.

 

MORE: People who’ve paid off debts give their tips on how to do it

MORE: How do you know if you’re in a ‘debt crisis’?

MORE: How to support someone who is in debt without giving them money





READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.