How does credit scoring work?

 


During the Covid Pandemic maintaining and being in control of our personal finances has and will continue to be a major concern for many of us. With job uncertainty, extended borrowing, taking payment holidays from credit cards and mortgage payments brings so much pressure on a personal level it can be very difficult to bear.

Getting back on track can be a lengthy process but it’s achievable and we need to look forward and rebuild from here. Taking time to check and manage your credit score is important as it’s not only about your mortgage and credit cards but also impacts on insurance applications, mobile phone contracts, utilities etc.

Can you check your credit score?

You can check your credit store online with any of the credit scoring bureaus or banks, you have a legal right and with most it’s free. By checking these you can see if any mistakes have been made and catch these early and get them removed as any company doing a credit check on you will see these.

How to get a good credit score

  • Make any loan repayments on time. You are more likely to be seen as as a good/worthy credit risk if you’ve borrowed before and repaid on time with other banks etc. A late payment history will be reflected on your credit scoring.
  • Clear your credit card balance each month. Leaving a balance on your credit card each month will impact on your credit score and you will pay interest on this. Also, anything you buy on your credit card is legally protected and some credit card lenders offer cashback offers, loyalty points etc.
  • Check your credit rating and get any mistakes removed. You can register with a credit card rating company, there is a fee for this but there are also benefits. You can see how your credit rating is fairing and check any companies that have checked your credit score. They also notify you of any potential identity fraud.
  • Avoid making multiple credit applications as this could impact your score in a negative way. Every time your credit is checked a note is added, if you’re checking it’s considered a ‘soft’ enquiry and won’t affect your credit score however, a check from a company for example, your mobile phone provider would be considered a ‘hard’ enquiry and would be registered as such.

The bottom line is the better your credit rating the more choices are available to you, and the choices can be far more favourable, by demonstrating financial stability better rates of interest on loans and mortgages could well be offered.

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