If you are unaware of what a credit score is or you’ve never checked your own it is really important to know that it is very beneficial throughout your life. Your own credit report serves as a sort of summary for your financial reputation. Its basic function is to tell lenders if you are paying back all your credit outgoings, paying off those standing orders and any reoccurring debts you come across, in addition to this, it also keeps notes of paying your finances on time and meeting your financial obligations.
Where does it come from?
A credit score is derived from information in your credit report, everything you pay-out impacts your credit rating. Phone contracts, overdrafts, store cards and credit cards all have an effect on your credit rating, and the way you pay these back and the time it takes are all factors in determining what sort of credit score you will have. Because your credit report reflects how you have handled available credit in the past, it therefore predicts how likely you are to pay your bills in the future based on information in your credit report. If you want to take out a short term loan with a lender who practices responsible lending such as Wizzcash, they will take into account your credit score when it comes to determining whether you can afford to pay it back.
Ways to build good credit
- Make sure you pay on time and in full: to build good credit, you need to spend that credit. You can borrow as much as you want as long as you pay it back on time and in full. This is what makes agencies impressed with your credit score, because they can see despite you spending this credit, you are in fact paying it back when and where it is needed. This really shows that you are reliable with your credit thus giving you a good credit score. If however, you miss a payment on finance or on a payday loan for example, this can have a negative effect on your credit score which can impact the likelihood of being able to borrow money in the future.
- Try to keep with one credit card: you may want to dash away your old account and get a new credit card, but if you didn’t know, older accounts which are kept open with occasional use throughout the year helps you to retain a valuable credit history and may even help your credit score.
- Check your credit score for errors: it’s really important that you frequently check your credit score because there might be some errors that are affecting your credit score. It’s true when I say; credit reports have errors serious enough to affect the creditworthiness of the subject of the report.
Making sure that you have a healthy credit score proves pivotal in regards to the progression in one’s life. Whether you want a mortgage, car on finance or just want to be eligible for a credit card to help you with those extra costs, maintaining your credit report will help a large amount when it comes to doing these things.
Generic advice is not a service regulated by the Financial Conduct Authority.