Yes
our credit score can affect your chances of being accepted for a credit, loan, credit card, mobile phone contract or mortgage.
And because of that, it has the potential to have a significant impact on your life.
Credit providers, from banks to car dealerships, use your score as one of the factors in deciding whether to offer you a loan. This gives them an idea of how successfully you have handled your bills and debts in the past.
Check your credit score
The good news is that you can check your score before applying for credit with a credit reference agency. These companies store your credit report, but they do not determine what information it contains.
There are three major credit reference agencies – Equifax, Experian and TransUnion (formerly CallCredit). Everyone uses their own system to calculate your score, so your results will be different for everyone.
However, your score will always be a three-digit number, but the range in which it can fall and what constitutes a “good” score will depend on the agency.
The principles around a good score, however, remain the same – in that your level of debt, how often you apply for credit, how much of your credit limits you use, and the quality of your repayments all determine the quality of your credit. score.
Here is more information on how the various major credit bureaus work.
Equifax: The maximum score at Equifax is 700. Here’s how it breaks down.
Between 420 and 465: good
Between 380 and 419: Medium
Between 280 and 379: mediocre
Equifax offers a 30-day trial, with its service costing £ 9.95 after that. But if you sign up for the credit scoring service, ClearScore, you can get a free Equifax credit report every month.
Experian: Experian’s credit scores are rated out of a maximum of 999. They are broken down as follows:
Between 881 and 960: good
Between 721 and 880: fair
Between 561 and 720: mediocre
You can get a 30-day free trial using Experian’s CreditExpert service. After that it will cost you £ 14.99 per month.
TransUnion: If you check with TransUnion, your score will be out of 710. Here’s how it breaks down.
628 and more: Excellent
Between 604 and 627: good
Between 566 and 603: fair
Between 551 and 565: mediocre
Along with your score, Transunion uses a rating from one to five, with one being the worst and five being excellent.
If you sign up for a free lifetime service called Credit Karma (formerly Noddle), you can get a free TransUnion report.
However, keep in mind that TransUnion is not as widely used by credit providers as Experian or Equifax.
Why is a good score important?
A good credit rating means that a lender is more likely to view you as a lower risk. This will not only increase your chances of acceptance if you hope to borrow money, it will unlock better deals, such as interest-free credit cards.
By using a comparison service to find the best credit cards and personal loans, you will gain insight into the market and what kind of rates you might be getting.
Many vendors now also offer eligibility checkers that allow you to see the likelihood of being accepted for a particular deal without requesting.
This approach leaves your credit report free of “traces” which, in turn, can deter other lenders when you apply for credit at a later date.
But if you haven’t checked where your credit score is, it may be worth doing before you apply for credit – especially expensive loans like a mortgage for your first home.
However, do not dwell on getting a certain number as a credit score. Regardless of your score, it does not guarantee that you will be accepted or rejected for a credit application.
It will also depend on a range of other factors, including your personal circumstances, annual income, reasons for taking out credit, and even the vendor’s appetite for lending.
Check your score
It’s worth asking which credit reference agency a particular provider uses to determine the success of your application. The answer may well come under the name Experian, as it is the largest and most used credit reference agency.
However, it is possible to check your three scores with the major agencies above using CheckMyFile, which offers a 30-day free trial and £ 14.99 per month thereafter.
This can provide useful information about your overall financial situation and where it could be improved.
Finally, remember …
Lenders have access to different information about your financial history, depending on the agency they use.
They also have their own criteria for accepting applications, so even if your score isn’t as good as you would like, that doesn’t necessarily mean you can’t get credit.
However, the fact remains that the higher your credit score, the more accepted you will be for credit which – whether you use it or not – is always a good option to have.
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