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23rd October 2018
If you’re in need of a financial product, the likelihood is that your credit rating will be an important factor in whether or not you will be accepted, as well as how much it will cost you. This can apply, not only to loans and credit cards but also things like car and home insurance too. Your credit rating really does make a difference and any black marks on your score can be felt for months or even years to come.
The good news, however, is that you have the power to change and improve your score, it just takes time, patience and self-discipline. So here are our tips:
What exactly is a credit rating?
If you’re looking to apply for a loan or other form of credit, then knowing your credit rating or credit score is paramount.
Lenders use this information to decide how much to lend to you and the price. Some people think that, if they have never bought anything on credit and don’t own a credit card, they will have a good credit score, but this reluctance to borrow could actually work against you. You need to have a record of borrowing and paying back.
You can help yourself by paying things like your mobile phone bills on time. This could help to increase your score, as it shows how you are a reliable and stable credit customer.
You can check your credit rating by using one of the agencies like Experian, Equifax and Noddle. These sites calculate your credit score and often also provide information on how you may be able to increase it.
Why is your credit rating important?
Your credit score is a tool that a lot of lenders use to check whether you are a good risk for credit. It helps them judge whether you will be able to pay back the money they lend you based on factors such as your repayment history and how much you are borrowing.
How can your credit rating help you?
Lenders are trying to predict your future behaviour based on your previous financial actions. If you have a poor credit history due to missed payments or have not established a track record because you seldom borrow, it may result in you only being eligible for a higher interest rate on something like a credit card or a loan, instead of a preferential rate.
Your credit rating will be an important factor if you want to get a mortgage and again, if you have a healthy credit score you could secure a better rate of interest. Usually, the better your rating the better your loan terms will be.
Sometimes even landlords and estate agents use your credit score to check your reliability. So having a less-than-perfect credit score could even make it more complicated for you to rent property.
How can you improve your score?
The Money Advice Service website has many tips that could help you improve your credit score. Some of these include:
So if you’re about to apply for a mortgage, loan, credit card or take out any purchase agreement check your credit rating first - and if it’s not looking too good, take steps to improve it.