Credit-checking agencies and lenders use their own criteria to calculate your credit score.
Your score is a reflection of how well you’ve managed credit in the past – but the score is unique to the lender or credit agency.
It helps them determine whether or not they should lend to you based on the type of borrower you’ve been in the past. But there is no such thing as a single universal score.
So it’s therefore hard to determine what the ideal credit score looks like simply because each lender judges you differently.
While it’s useful to track your score, it’s not what lenders see. When you apply for credit, lenders look at your borrowing activity over the last six years or so. And it’s this that you should make sure is in the best shape.
"Improving your credit history can take time."
Improving your credit history can take some time. Whether you’re building it from scratch or repairing the damage, there’s a few things to keep in mind to boost your credit history.
Keep on top of your payments
When you take out credit, like a mortgage, credit card or loan, and make your payments on time each month, your credit history will show you to be a responsible borrower. The same applies to your other outgoings such, as your utility bills, car insurance and mobile phone contract.
Keeping on top of these payments will positively impact your credit history and could open doors to more competitive interest rates and higher credit card limits. If you’ve been a responsible borrower in the past, lenders might be more willing to accept your application.
Setting up a Direct Debit can make your finances more manageable. By doing this, the money will come out automatically each month.
This is useful as if you miss a payment or make it late, future lenders you apply to will see. This can affect your ability to borrow.
Credit builder cards
If you’ve never borrowed before, you may be surprised to get a low credit score. But the thing is, if lenders can’t see a record of your borrowing activity, they can’t tell if you’re responsible borrower and so may choose to not lend to you.
They’re things you can do to kick-start your credit history, though. Taking out a credit builder card could give your credit history the boost it needs, for example.
These credit cards typically come with lower credit limits and higher interest rates as lenders may see you as a greater risk. However, when used responsibly, a credit card can help you build a good credit history. As long as you pay back what you owe each month, you should see your credit history gradually improve.
Signing up to the electoral roll if you haven’t already done so is a simple step you can take to help any applications for credit run smoothly.
Up-to-date information can help lenders confirm your identify. If they struggle to check your current address, for example, this can cause delays in your application and might even result in it being rejected.
Hold off applying
Each time you apply for credit, you will leave a footprint on your credit history. Be wary about applying for a number of products close together – lenders may conclude that you’re desperate to borrow money, which could lead them to reject your application.