In Partnership with Sainsbury’s Money Matters Blog
Whether you are saving for your first home, would like better insurance rates, or simply want to better prepare for the future, there are a number of benefits to having a good credit score. The experts at Sainsbury’s Money Matters have outlined all you need to know to better understand your credit score and the steps you can take to improve it.
Understanding your Credit Score
Understanding how credit scores work can be difficult and often frustrating when it affects your ability to borrow money. Generally, credit scores are used by lenders such as banks and credit card companies to determine whether they should give you credit or lend you money. These companies are looking for someone who is a relatively low risk, meaning they’re predicted to be able to make the repayments. With this in mind, it’s crucial to know about your credit score, what can impact it as well as how you can improve it.
How does Credit Scoring work?
There are three main credit reference agencies in the UK that calculate credit scores and produce reports based on an individual’s credit history. The information collected from these credit agencies determines your credit score which is then displayed as a three-digit number which records your lending history.
Improving your Credit Score
If you have a poor credit score this might mean that you’re seen as high risk and lenders could reject your credit application or offer you a frustratingly high-interest rate. However, there are several simple steps you can take to improve your score which we’ve outlined below:
- Pay your bills on time. This is an effective way to prove to creditors that you’re competent in managing your finances.
- Try to eliminate any outstanding debts before applying for credit.
- Keep your credit usage low. Borrowing less than 30% of your limit demonstrates that you can responsibly manage your finances.
- If you haven’t already, register for the electoral roll and ensure you’re keeping your personal details up-to-date.
- It may be worth checking for mistakes on your credit report, as something as small as a wrong address can impact your credit score.
To gain a more comprehensive understanding of your credit score and how you can manage it, check out this complete guide to credit scores from Sainsbury’s Bank. Alternatively, if you require advice from a mortgage expert, get in touch today by clicking here, or calling us 0207 183 0646.
