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What makes a good credit score?
The term ‘credit score’ can be quite confusing. This is mainly because there’s actually no such thing as a single, universal credit score (more on that later).
But it’s important you know the ins and outs of what makes a good credit score, especially if you plan to borrow.
We’ll take a look at how you can check your credit history for free and how you can improve it in order to increase your chances of being accepted for credit.
What’s a credit score?
First and foremost, it’s important to understand that there’s no such thing as a ‘universal credit score’. Each credit reference agency has a different scoring system they use to mark you out of, but they each base this on the same information – your credit history. It’s this that’s important to lenders.
With this in mind, it’s important your credit history is in the best shape. After all, this is what lenders will see. They will be able to view how well you’ve managed credit in the past.
Can I improve my credit history?
Keeping up with your repayments is key to a good credit history. If you’ve missed any payments or have ever been issued with a default or CCJ (County Court Judgement), these negative marks will be visible on your report for future lenders to see.
These marks will affect your credit history for six years or so. It’s important to make sure you keep up with your repayments, or borrowing in the future could be difficult.
If you already have credit – whether it’s a credit card, loan or mortgage – it’s important to make sure that you’re on time with your payments each month. It’s also vital you keep on top of your other outgoings, such as your utility bills and mobile phone bill, as these can also affect your credit history.
How do I check my score?
Lenders will access your credit history through one or more of three credit checking agencies - Experian, Equifax or Callcredit. It’s worth signing up to at least one of them. This way you’ll have access to what lenders can potentially view about you.
The great news is each of these credit checking services offers a free service. You can find out more on how to check your credit history for free, here.
You’ll notice that when you sign up to a credit reference agency, you’ll be given a credit score. But, as we’ve previously mentioned, each credit checking agency has its own criteria to calculate your score.
So if all the scores are different, do they matter?
Well, they can still serve as a useful guide. The score you’re awarded gives you an idea of how positive or negative the reference agency thinks your credit history is.
So, if your score is very low, you know you need to work on improving your credit history. And if it’s very high, you know that you have a better chance of successfully applying for some of the more competitive borrowing deals.
You should use the score you’re given to get an idea of how lenders will view your credit history – and you as a borrower.
If you’re looking for ways to improve your credit history don’t worry, Ocean has you covered. For tips on the necessary steps to take to ensure your credit history is in the best shape possible, check out this blog.