A credit score provides lenders with an objective indication of your money management and spending behavioural habits based on your past history. Those with little credit history do just as poorly as those with poor credit history. In contrast, a good credit score is based on good management skills of credit and money. The key point is that you need to show lenders that you are responsible with credit and are able to use it well. This is because your credit score determines whether a lender will lend you credit; how much the lender is willing to borrow you and how much interest to charge you.
Having a good credit rating/score becomes even more important when you are seeking to buy a home (taking out a mortgage); getting that dream job (credit checks); a new credit card/personal loan; monthly car/home insurance; to even new mobile phone contracts. Therefore, it would be wise to make a start in building/improving your credit score sooner rather than later.
Checking your credit score.
Your credit score can be checked via UK credit scoring agencies such as ClearScore and Noddle; both of these are free to use. Other credit scoring agencies include Equifax, Experian and Callcredit which are also free but only for a speculated ‘free trial’ period.
However, there’s no real need to pay to view your credit score and report if you are using either ClearScore or Noddle (you can use both simultaneously). Regardless of your choice of credit scoring agency, it is important to document and keep a record of your credit score and reports. In fact, it would be helpful to store personal copies of these reports for any future reference purposes.
The main point is to check your credit report regularly to look out for any mistakes/errors and to correct these immediately. This will help improve and build your credit score/rating.
Determining a “good” credit score.
Different lenders will have their own established criteria when working out credit rating scores. With this point in mind, there is no such thing as a universal credit rating/score. Nonetheless, if you have a good credit score with a credit reporting agency, you should, in theory, have similar scores with other credit reporting agencies. The main point is that you should aim to make yourself as attractive as possible to lenders via building/improving your credit history.
It is also worth noting that a good credit score does not guarantee your success of being approved for credit or being offered the lowest rates of interest in the market. This is because a lender’s decision is not solely based on your credit score but other factors such as your income and level of expenditure.