Last Updated on 6 February 2023 by Heavensa
What is a Credit Score and Why is it Important?
A credit score is a number rating before 1 and 1000 to determine what types of credit you could be allowed to have. A credit score can be used to determine whether someone qualifies for loans, mortgages, or other types of financing. A high score will make it easier to qualify for these things; while a low score will make it more difficult.A low credit score can also affect your interest rates on loans or your insurance premiums.
Credit scores are usually determined by a mathematical computation from information in your credit report, which can include:
– Your payment history (do you pay your bills on time?)
– The amount you owe (how much do you owe?)
– The length of time you have had credit (have you had it for a long time?)
– Your age (younger people are more likely to get loans)
How To Improve Credit Score
1) Check your credit report for errors, everything needs to be accurate otherwise it could impact your credit score.
2) Pay off any outstanding balances on your accounts on time every month, closing accounts and paying things off in full isn’t always the best move but paying things off on time is. Try to pay off more than the minimum monthly amount too!
3) Keep your balance below 50% on all accounts, credit utilisation is very important and making sure you haven’t used too much of your available credit, but also having it all available isn’t good either.
4) Apply for new credit sparingly, don’t be applying for credit and doing hard searches just out of pure interest as a hard search goes down on your credit score file. Always use Money Saving Expert to soft search eligibility.
5) Get a credit card to use every month and pay off every month. A credit card is a good way to re-build an excellent credit rating but you have to make sure you’re only spending what you can afford to pay off every month.
6) If there are any late payments you may be able to ring up and have them taken off as a gesture of goodwill, especially if there is only one on that account.
Heavensa also known as Heaven’s A Dreamy Life is the digital home of Gee, a UK-based content creator and entrepreneur.