Including what is classed as a good credit score and your credit score explained
As a parent, when was the last time you looked at your credit score? Gone are the days when you just need it to get a mortgage. Now you need a good credit score for anything down to your car insurance or even what bank account you could be eligible for.
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What is a credit score?
Every adult has a credit rating. This gives a lender a snapshot of what your financial history is like.
When you apply for anything that involves money, like bank accounts, credit cards, balance transfers and even saving accounts, your credit scores will help a lender to predict what you are like to lend to overall.
Loads of different data is used and your credit score can be affected by small things that you wouldn’t normally even think twice about. Examples are like how many times recently you’ve made a loan application, how much you owe and if you can transfer credit cards to a better rate.
The issue is that while it is a flexible number many lenders don’t want you to understand it. They want to sell you products to “help” you understand it and dig down into it when really there’s no universal number for just one person. Each company assesses you from their point of view.
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Things you need to know about your credit score
Start by getting your credit report. You can use Experian credit report or Credit Karma which both offer this service for free. They can help you to improve your credit rating and show you your credit history. Viewing your credit reports in a monthly basis will help you to see how you are doing.
Credit scoring is all about the lender being able to guess if you’re a good person to invest in. They look at your past to try and work out your future.
It’s not always you, sometimes it’s them. You could have the best credit score in the world but if they don’t think you will make them money then they may reject you anyway. It all depends on the type of person they are looking to lend too. Sometimes, to improve credit, you may have to start paying off a part of your credit.
How risky you are to lend to isn’t the be-all or end-all. Some companies want to take on more risk and others don’t. Don’t be put off after one rejection.
Your student loan, parking fines, or council tax arrears aren’t shown to lenders. I repeat they do not have access to this information.
Lying on an application is a fraud. If they ask you something in an application then you must be true even if you think it will affect your borrowing criteria.
Your credit score can affect what kind of rate you get. Keeping track of your credit score could mean that you are offered a better rate of interest then the next person.
When it comes to your credit score you are just one of many numbers. The lender doesn’t know you and can only go on what they have. This is why you must keep on top of the credit rating.
Your credit score can affect everything including utility bills or your mobile phone contract.
Try to pay things like your home or car insurance yearly. It’s well known now that paying monthly can hit your credit score.
The credit firms all share data. They may try and keep it secret but they all talk.
Each company assesses you differently. There’s no one number fits all.
What is a good credit score
Most companies see a good credit score as something like 881 up, with ‘fair’ or average above 721.
To get a good credit score and reach those numbers you first have to understand where the companies are getting their information on you.
First up it’s from the application form. This may seem self-explanatory but small things like changing your job title too many times or even having different numbers across different companies can affect your application.
Second is about your past lending history. This is why if you have no credit score then normally your bank will lend to you as they have a history with you.
Next information could come from reference agencies like Equifax or Experian. They get their data from the electoral roll and search for any other addresses you’ve been linked too.
They search for any fraud data or through your bills to see if you’ve had any mis payments.
How to boost your credit score
Don’t panic if you feel like this is another thing you need to keep track of. It’s not the end of the world if your credit score is low but it could affect your borrowing potential. If you think you may need to borrow in the next 6-months, these 25 tips to help you improve your credit score are for you.
Use a company like Experian to see your credit profile*. They explain what everything means and give you tips on how to improve it.
Think of lenders like vegetables. We don’t like them all and pick only the ones we like the look of. Borrowing is like this. Making sure you’re the most attractive vegetable for lenders can open more doors.
Before you apply for anything check your credit score. Errors happen and you don’t want it to kill your application before you started.
Weirdly, it’s been shown that if you register to vote then it’s easier to borrow. This is because lenders tend to check your address and an easy way to do this is through the electoral roll.
Try not to default on any of your payments. If you are struggling then please call the lender and chat to them.
If you share a financial product with someone make sure that they don’t default either as this could hurt your credit score too.
Ask for a soft search or quotation search before you go ahead. This will tell you quickly if you’re likely to be accepted or not without leaving a footprint.
If you decide to uncouple at any point, make sure that your finances are separating too! Write to the credit reference agencies and make sure they know. It means that you could be untangled quicker.
It’s a myth that compassion sites leave a credit footprint. Most run soft searches that aren’t shown so lenders can’t see them.
Paying insurance monthly not only costs you more but could also hurt your credit score.
Use any savings you have to pay off debts first. While it’s true some debt is good for your credit score too much is bad. Try to keep a happy medium.
If you have a default on your file that wasn’t your fault don’t just leave it! Fix it! Phone up the lender and tell them and ask them to remove it.
Phone the credit reference agency directly if your default is not your fault and the lender is not playing ball. It could just a genuine mistake but it needs to come off. Fight for it!
Cancel any old store cards or credit cards that you used to have. If you have loads, then only close half as weirdly closing too many in one go can be a turn off to some lenders.
If you know that something big is about to happen, like maternity leave for example, then apply now. Lenders like to see a straight line. Please do not lie as that is illegal.
Being consistent is key. Make sure you have the same address, number, job role, etc across all applications.
Credit repair companies don’t work.
You can ask why you’ve been rejected. They may just say ” because you’ve failed to meet our lending criteria” but it’s worth a shot.
Paying your rent or mortgage on time can have a big impact! Keep up to date on your payments for a nice kick up the rankings.
Stay away from getting cash out from credit cards. Many lenders see this as a poor money choice.
County court judgments can count against you. Try and wait in till they’ve been cleared to apply for credit.
Building a picture of your financial self can be hard if you’ve never borrowed before. It may be worth looking for a short term cash loan or a credit card to help you build some history. Now. don’t get me wrong, the rates are going to be horrid because you have NO history, but by paying it back on time by direct debit every month can show lenders that you are trustworthy.
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Make sure you’ve changed addresses on any old accounts that may still be open. Having several addresses can look odd and harper your chances.
Every time you apply for something you leave a credit footprint. Try and reduce how many times someone runs a credit check on you by using FREE eligibility calculators.
Check your credit score every time you’ve been rejected. Find out if it’s you or them without having too many rejections on file.
I hope that this helps you to build up and improve your credit score.
If you enjoyed this post and would like some more money saving ideas, then head over to the saving my family money section here on Savings 4 Savvy Mums where you’ll find over 50 money saving tips to help you save your family more. There’s enough tips to help you save over £300 a month! You could also pop over and follow my family saving Pinterest boards for lots more ideas on how to stop spending and save more; Money Saving Tips for Families and Managing Money for Families.
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