What is my credit score?
When comparing and applying for loans – whether it's a home loan, a personal loan or even a credit card – you might come across the term ‘credit score’. Your credit score helps lenders determine how much you can borrow, or even if they’ll lend you money at all.
A credit score:
· Is a numerical figure that represents your credit history
· Allows lenders to evaluate the risk of lending you money
· Reveals your aptitude for repaying previous debts
How is a credit score calculated?
A credit score is essentially a number that grades your credit history. It takes into account every time you’ve applied for credit over the past five to 10 years, as well as how consistently you’ve made repayments. It uses this information to provide a number that lenders and credit providers can use to assess how likely you are to repay a loan:
· It takes into account home loans, personal loans and credit cards, as well as telephone and utilities
· It takes into account every time you’ve applied for credit, not just the successful applications
· It may also consider your age and employment, as well as how long you’ve lived at your current address
Any serious infringements, such as bankruptcies and court judgments, will also be taken into account and may have a serious impact on your credit score.
Why is your credit score important?
Your credit score is usually the first (but not the only) thing a lender examines when considering whether or not to lend you money. It also impacts how much you can borrow, with the lender:
· Evaluating the potential risk in lending you money
· Assessing your income and ability to service a loan, including existing credit and store cards
How can you find out your credit score?
It’s easy to find out your credit score. Simply contact Get Credit Score and sign up in less than 60 seconds. It pays to find out what your credit score is before applying for a loan, so you're not surprised by the outcome of your application.
What happens if you have a bad credit score?
If you have a bad credit score, the first thing you should do is go through each item and make sure it’s accurate. There are times when a credit provider may record a black mark against your name when it wasn’t warranted.
If you notice something isn’t right, you should always contact the company that made the mistake so they can amend it. If they fail to fix their error within 30 days, you can contact company’s independent dispute resolution scheme. This will be either the Financial Ombudsman Service (FOS) or the Credit and Investments Ombudsman (CIO) for products such as loans or credit cards, and the Telecommunications Industry Ombudsman or Energy and Water Ombudsman for errors with other bills
How can you improve your credit score?
If you do need to repair your credit score, the first thing to remember is to give it time. Defaults usually only stay on your record for five years. In the meantime, you could:
· Make sure you’re receiving all your bills and set up email and SMS alerts to remind you to make payments on time
· Set up auto-deducts so that your bills are paid automatically
· Consolidate debts into one loan, so that you only have to make one payment a month
· Avoid taking out more credit
· Continue checking your report