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A basic guide to credit score
What is a credit score? Why do I need a credit report? If you've started to ask yourself questions like these, the overall topic of credit score probably still seems a bit daunting. That's why it's important to start with the basics. By learning the basics of credit score, you'll gain a platform of knowledge that you can use to your advantage for years to come. And you might just be surprised at the range of financial benefits that getting to grips with credit score can bring.
Find out who sets your credit score, how it's calculated and the full range of scores that can be given to you. Also, learn why growing a strong credit score can only be good news for your long term financial health and how lenders reward high credit scores with lower interest rates and more favourable deals.
A credit score is a numerical value assigned to you by lenders to determine the level of risk involved in lending you money, also known as your credit worthiness. It is calculated from the information held on your credit file, which is a summary of your credit history.
What type of information is used for my credit score?
Your credit score is comprised of the following details and these segments of information are used in conjunction with each other to calculate your credit score.
Personal information - Your name, date of birth, current and previous addresses, and current and previous employers.
Credit History - Details of credit accounts both in your name or held jointly with another party such as a spouse. This includes account balances, when the account was opened, the credit limit or loan amount, the terms and conditions and a history of late payments.
Most people have heard of credit score and are aware that a strong score is beneficial when it comes to getting approved for personal finance like credit cards and loans.
Usually though, that understanding is vague with very few people realising just how far reaching the influences of credit score can be on our day-to-day lives. In fact, fewer still have been successful in arming themselves with all the facts around what needs to be done to improve credit score and the causes that can damage it.
As a first step, it's important to get used to the credit score scale that's used by the credit agencies that set it. After all, every adult in the UK has a credit score and lenders use this as an index to help them decide if they're prepared to offer you credit, and if so, at what rate of interest.
How do I improve my credit score? This is perhaps the most common question people ask when it comes to credit score, particularly if there's clear room for improvement.
If you want to grow your credit score then you can do so by following our top 10 tips:
1. Pay your bills on time
Payment history makes up a huge 35% of your total credit score and is therefore the most important factor to consider. If you're a regular late payer, or miss payments altogether, then your credit score is never going to improve.
2. Settle your bills twice a month
There's no rule to say you can't pay your bills more frequently. Splitting your bills so that you pay them twice a month will look good in the eyes of the agencies that set credit rating and your credit score will receive a boost as a result.
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* After your 30 day free trial, a monthly membership fee of £14.99 applies. You can contact us to cancel within your free trial and no fees will be payable. If you cancel after your free trial, no further monthly fees will be payable from the date of cancellation. However, no monthly fees already paid will be refundable. Full membership benefits are subject to credit reference agency validation of your identity. Your membership will be cancelled if you remain unvalidated after 90 days. During this period you will be billed your monthly membership fee.