Your credit score is often seen as the key that could unlock access to better credit deals, mortgage approvals and more. But what is your credit score? Who decides it? And what are the factors that most affect it?
It's data that summarises your credit history. It can be useful to review it on a regular basis and making sure it provides an accurate and up-to-date picture.
When you make an application for a loan, credit card, mortgage or other type of credit (like a new mobile phone account), lenders calculate a credit score. This is done by weighing up all the relevant information they find on your application and on your credit report.
So they can judge for themselves if they think you'll be a responsible borrower and likely to repay what you owe them.
Different lenders can score the same factors differently, using their own formula based on their own factors.
Companies like Experian can help you understand how your credit history could be interpreted by lenders.
They can also help you understand your credit report and how the way you've managed credit in the past might affect applications you're making now. This can give you an indication of what kind of loan you might get.
Usually, a higher score means you're seen as lower risk - meaning you're more likely to get credit, and at better rates.
For example, the highest credit score you can get through Experian, is 999. Getting your credit score up could boost your chances of getting better loans at better rates.
Try to stay within your credit limits and pay your credit bills on time. Missed or late payments affect your credit score for 6 months after you've paid them. Late payments will remain visible on your credit report for at least 6 years.
Credit scoring can also look at the average age of your accounts, awarding extra points for longstanding relationships, so try not to chop and change all of your accounts on a regular basis.
Review your credit report regularly: make sure it's up to date and holds accurate information. Contact the relevant lender or your credit score provider if anything needs amending. Even small details like the way your name and address is recorded can have a significant impact.
Don't resort to a scatter gun approach to credit applications, as each application is recorded on your credit report and if lenders see lots in a short period, they could think that you're desperate or suspect fraud.
Make sure you register to vote at your current address, as lenders use the electoral register to help confirm who you are and where you live.
If you have several credit cards and overdrafts, it can be easy to lose track of just how much credit you have available.
One of the major drawbacks of having access to a large amount of credit is that you may be tempted to spend more than you otherwise would, racking up debts that are expensive to pay off.
if you have access to too much credit compared to your income, the risk of you not being able to repay the lender is higher, which means It's less likely you'll get approved for financial products in the future.
Add up the limits on all your credit cards, store cards and overdrafts, and you'll get the grand total of credit you currently have access to. You should then consider how this compares to your income.
If you did spend up to your limits, consider whether would you able to afford all the monthly repayments. If the figure looks unmanageable, you may want to consider having a financial sort out, cancelling financial products you no longer need or reducing excessive limits to match your requirements.
If you are late with bill payments, this can damage your credit score. However, making payments on time can often improve your credit rating, including on the following:
Your mobile phone bill