What is your credit score and how can you improve it?

*This is a collaborative guest post

In today’s modern world, it seems there is an increasing fixation with all things relating to money and finance. As a result of this, a popular topic of discussion is how to improve your credit score.

According to research, the average credit score in the UK rose from 346 to 380 between 2017 and 2018, but that three-digit number may not mean a lot to people who are not familiar with the system. 

So, what is a credit score, why is it important and how can you improve it? Fear not, for the answers are right here!

What is your credit score?

In simple terms, it’s a three-digit score that’s based upon your credit history. Essentially, it’s a record of how you’ve managed your finances in the past. It also informs you how likely it would be that you might be accepted for credit if you apply.

Your credit score can differ between lenders and it can also alter depending on which product you’re looking to buy. Lenders will use your credit score to decide whether to lend to you, how much they’re willing to let you borrow and at what interest rate.

How can having a good credit score help you?

Having a good credit score will mean you are eligible for a wider range of financial products and will make it increasingly likely to get accepted when applying for credit. For example, if you’re looking to take out a mortgage, a strong credit score may mean you’re able to borrow a larger chunk of cash and pay it back at a lower interest rate, because the lenders will see you as someone who is responsible with their money.

How can you improve your credit score?

If you’re looking to improve your credit score, there are numerous ways to do so. For example, registering on the electoral roll is relatively simple and can prove beneficial, as can correcting any seemingly minor admin errors on your file, such as having the wrong address on record.

Additionally, paying your bills on time — whether they be household or credit card bills — will act as a huge tick in the eyes of potential lenders, while living in the same home for a significant period will also help to boost your credit score.

What are the myths around credit scores?

Unfortunately, there is plenty of misinformation when it comes to credit scores, including some of the following:

• “Checking your report will damage your score” — This only applies to certain ‘hard’ credit checks, which occur when you apply for credit. ‘Soft’ credit checks, which tend to be background searches and aren’t visible to lenders, have no effect.
• “A better job means a better score” — Not necessarily true, as your title or salary have no direct impact on your score.
• “Wiping out debt will improve your score” — Again, this is not true in all cases as the record of your debt can remain on your record for years.

So, get yourself clued up when it comes to credit scores and make sure you’re fully aware of all the complexities before you start to try and improve your own.