What’s your credit score? Is it good or is it in need of improvement? We explain all you need to know about credit ratings, including the impact they can have on your financial footprint, as well as 10 practical measures for improving them.
When was the last time you checked your credit score? In fact, have you ever checked it? While credit scores aren’t something you need on a daily basis, it does pay to get into the habit of keeping tabs on what your score is.
Here, we explain the importance of credit scores, the information they hold about you and what you can do to improve yours.
Your credit score doesn’t just affect any applications you make to borrow money (e.g. mortgages, loans and credit cards), it can also impact the interest rate you pay. And if you are looking to move from one rental property to another, your prospective landlord may look at your score as part of their initial checks.
It’s easy to fall into the trap of thinking your credit rating is good because you’ve hardly had to borrow money over the years or you’ve not missed any mortgage payments. However, having a limited credit history (created by you not really borrowing much money and paying it back on time) can actually affect your credit score. All of the different lenders use different calculations to determine your credit score, despite the fact they tend to work with the same set of information.
There are three credit reference agencies in the UK - Equifax, Experian and TransUnion. They’re the organisations to reach out to for a copy of your credit report.
It’s not uncommon for these agencies to base your report on different information from different lenders, making it all the more important for you to check your report at least once a year. And if you’re just about to make a big application (e.g. for a mortgage), check your report well in advance to prevent getting caught out by any nasty low credit rating surprises. (Note: your checks aren’t recorded on the report, so don’t worry about over-checking, it won’t affect your score).
Generally speaking, credit reports contain the following information:
We’ve already mentioned the importance of checking what your credit score is on a regular basis. In fact, there are actually apps out there, such as Credit Karma, CreditWise and Credit Sesame, you can download and use to monitor your score.
But if your result’s not as good as you’d like it to be, there are certain things you can do to help improve it. They include:
If you’re concerned about your credit history or it’s impacting your finances, we can help. Our specialist debt advisors are here to work with you to help you get your financial situation back on track. All of our services are free and strictly confidential. Get in touch with our team of friendly advisors today.
We support past and present members of the Institute of Chartered Accountants of England and Wales (ICAEW)1, ACA students2, ICAEW staff members3, and the family and carers of members and students4.
You can find out more about our available support both in the UK and around the world on our support we offer page.
If you need financial support, we carry out a means test where we consider income, expenditure, capital and assets.
*Please note none of our other services are means-tested.