Credit score

What is a credit score and how to check your score for free

You’ve probably heard the term, but what is a credit score?

This is extremely important and you should monitor your credit score closely. This will make a big difference in what you pay if you ever need to borrow money. For this reason, it is useful to know how your credit score works. If you’re concerned about your past finances, don’t panic – there are plenty of ways to improve your credit score. (opens in a new tab)

james jones (opens in a new tab)head of consumer affairs at credit reference agency Experian (opens in a new tab), says, “It’s worth investing some time on your credit score. It can give you access to the best rates on products like credit cards, mortgages and loans. Luckily, there are several ways to start improving your score, with the first step being to check where you are right now.

What is a credit score?

A credit score determines whether you are deemed to have good or bad credit. Whether you want to take out a mortgage or just sign up for a new mobile phone contract, you can expect the lender to check your credit history. When you apply for a loan, lenders will perform a credit check to assess your eligibility for a loan. This check will reveal your credit history – your history of borrowing and repaying on time.

Lenders will use this to generate a credit score. This is then used to determine how reliable the borrower you are likely to be. A good credit rating gives you access to the cheapest offers.

The GoCompare Money Expert, Matt Sanders (opens in a new tab) says, “Your credit score is something lenders use to determine your financial reliability, along with other factors such as your employment status, income, expenses, and purpose of credit. If you have a high credit rating, lenders will see you as less risky and they may be more likely to approve your loan, whether it’s a car, a mortgage, a credit card, overdraft or even a new phone.

What is a credit score for?

Your credit score helps your lender quantify that you are a reliable borrower. It shows if you have a record of paying loans and paying bills on time. The higher your credit score, the more reliable you are considered a borrower.

If you miss payment dates for any type of debt – even your cell phone or gas bill – it will be visible to other creditors. This could then have an impact on future credit applications. Missed or late payments may indicate that you are financially strained or lacking in accountability. Then lenders are unlikely to see you as a decent candidate for new loans.

A good score usually comes from a history of responsible money management. But what it looks like is a closely guarded industrial secret. Banks and other lenders don’t reveal how they rate you, which can be frustrating.

However, the major credit reference agencies have their own scoring systems which you can see. To Equifax (opens in a new tab) the scale is from 0 to 1000 and to Trans Union (opens in a new tab) it’s 0-710. Experian (opens in a new tab) operates on a scale of 0-999 and is provided as a guide to how lenders might interpret information on your Experian credit report. Experian’s credit score bands are as follows: very poor from 0 to 560, poor from 561 to 720, average from 721 to 880, good from 881 to 960, and excellent from 961 to 999.

Checking credit score ranking on laptop

What can hurt your score?

There are several things that can hurt your credit score, including:

  • Missed payments
  • Large debts
  • Multiple credit applications

And it’s not just about not paying back. If you have a lot of large debts, this will have an impact. Multiple applications can also be harmful. Every time you apply for credit of any kind, it shows up on your file. Although it is not stated if you have been rejected, several applications will suggest that your applications have not been successful. This looks bad for any other lenders you might apply to.

Financial expert Matt Sanders explains, “There are a number of factors that determine your credit score, from past credit agreements and repayment history to the types of credit you currently have open and how much you owe. . If you miss regular repayments, don’t pay your bills, or have a lot of debt, these factors will contribute to a lower credit score.

Later this year, buy now, pay later accounts will also be on credit records. The move could see millions of people see their score negatively impacted if they go into debt they can’t afford. If you’re in debt and need help, check out our handy guide on how to pay off your debt.

Having no credit history can be just as bad as having a bad credit history because lenders feel more comfortable dealing with people who have a history of loan repayment. Those who have borrowed money in the past and shown they can repay on time are more likely to apply successfully.

How can I know my score for free?

You can get a good idea of ​​where you stand by checking your credit score with credit reference agencies for free before applying for a loan. You must obtain it directly from the three main credit reference agencies – Equifax (opens in a new tab)Experian (opens in a new tab) and Trans Union (opens in a new tab). All three will give you a free credit report. It’s good practice to check all three because then you can have peace of mind that whatever a lender uses, you’ve made sure it’s in good condition.

Alternatively, use CheckMyFile Free Trial (opens in a new tab) to check all three at once.

Checking your score doesn’t affect your credit history – or your score. This is something only you and the credit reference agency will know.

If you want to regularly check or monitor your score and get an indication of your creditworthiness, you can get online access with paid credit report packages. For example, your first 30 days of Equifax Credit Report & Score are free, then it’s £7.95 per month. For this, you get unlimited online access to your latest Equifax credit report and score, as well as alerts on any important changes to your credit report. It also promises full support from its customer service team. You can cancel at any time.

Alternatively, Experian’s CreditExpert service is free for 30 days and £14.99 per month thereafter.

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