Why Your Credit Score Matters, and How to Build It

LONDON, December 8, 2021 (Newswire.com) - iQuanti: You may be familiar with the term 'credit score' without knowing exactly what it means. Or maybe you don't even think it's relevant to you.

Your credit score is really important, and even if you think you don't need to worry about it right now, it's worth understanding and improving it for a time when you do need it. 

So, let's start with what it actually is. 

What is your credit score?

It's only three digits, but it's the primary factor that banks use to determine your access to credit, and the higher the number, the more likely you are to get the credit you want. Essentially, it's a lender trying to predict how reliable you will be based on the way you've acted in the past.

There are a few different scoring systems, so it's difficult to give a 'good' or 'bad' rating example, but it's based on a few different factors.

Information from the electoral register is used because it confirms you are who you say you are. More important than that, however, is past bankruptcies and your record of keeping credit commitments (such as credit cards, loans and mortgages). It's worth noting that most credit reports only look at the last six years, and the most recent information is what's most important.

Why does your credit score matter?

A bad credit score could mean you're rejected for things like loans, mortgages, and credit cards. For example, you may not be able to get the loan you want to start your business or a mortgage to buy a home. It can also influence more everyday credit agreements, like mobile contracts, monthly insurance, and energy deals.

It's not just about being denied credit either, because the higher your rating, the better your chances are of getting the best rate.

Take loans for example. Banks only have to give the advertised interest rate to a certain percentage of people. If you have a bad rating, they'll offer you a worse rate, or possibly reject your application altogether. 

So, how can you build your credit score?

In an effort to avoid a bad credit history, many people avoid any kind of interaction with credit, but this is also not ideal. If you've never proved how well you handle credit, then you're unpredictable.

If you use it wisely, you should apply for a credit card. If you keep your credit balance low (below 30% of your limit is a good amount) and always repay on time and in full, you'll see your score improve. 

Showing you can be trusted with credit is great, but don't make multiple applications within a short time-frame - this raises suspicion. A gap of at last six months is recommended. 

Registering on the Electoral Roll is probably the easiest way to improve your score. It confirms all the details you've provided and is seen as a mark of stability. Also, you should check for inaccuracies in your free-to-view reports that may be dragging your score down and dispute them. These could be expired ties to people with bad credit, or just simple mistakes.

Conclusion

A bad credit score may end up just being an inconvenience to you, but it could also change your life.

Lenders need to trust that you are reliable. Prove this to them by making sure that over the last few years, you've managed your credit sensibly. 

This way, you stand the best chance of getting applications approved, and at the best rates on offer.

Source: iQuanti, Inc.