Looking to better understand what your credit score is and what it means for your financial future? You’re in the right place.
Credit is everything in the modern age. It’s what will allow you to get a credit card, a loan, a mortgage and pretty much every financial product. Without good credit, your options become fairly limited. Which is not ideal. Because, as a borrower, you don’t want to be restricted financially, and have your options limited. Which is why it’s of the utmost importance you understand your credit score and credit profile fully. Luckily, you’re in the right place.
We’re here to talk about credit scores. In this post, you’ll find out everything you need to know about credit scores, and what to do if you’ve got bad credit. We’re covering loans with guarantors, credit cards, mortgages and everything else financial! We’ll even provide tips on how to improve your credit score over time, which means you’ll be better off financially in the future. Learn all about credit scores, right here.
What are Credit Scores?
Your credit score is a digitised summary of your financial ‘footprint’. It’s made up of all your credit history, anything that has involved you taking out credit. This could be a loan, credit card, mortgage and everything else. Credit scores are how lenders assess your reliability as a borrower, if you’ve got a good credit score, you’re more likely to keep up regular repayments on your credit. However, those with bad credit may be considered liabilities by lenders, and can have their applications denied or be given a higher interest rate. Although there are many different credit agencies, the three main ones are Equifax, Experian and Callcredit. And, annoyingly, each of them have different scales on which they score credit.
So, you’ll need to know the different scales each of these credit agencies use. Equifax scores out of 700 whilst Experian scores out of 999. Callcredit scores out of 5. It may be alarming to see a 4 on your credit report if you think all scores are out of 700. So, make sure you know what scale you’re on. There’re so many ways to review your credit, and by law you are allowed a fully comprehensive, detailed credit report from one of these agencies. These reports will be fully up to date, but there are some free websites that allow you to view, albeit with a couple of months delay (note this delay is on your credit report, it can be viewed instantly but it will not include the past couple of months). These free sites are sites like Noddle and Clear Score.
Good vs Bad Credit
So, as we’ve said, the three main agencies that score credit all have different scales. Which means you need to know what they consider as ‘good’ credit scores. Experian, who scales out of 999 deems a good score as 880 and up. As for Equifax, scaling out of 700, 420 and above is a good credit score. Finally, for Callcredit, scaling out of 5, 4 is a good credit score. Whilst these are what the credit agencies deem as good, lenders may have different ways of deciding whether your credit is good enough to get a better rate on a loan or credit card. If your credit is considered poor or bad, it limits your financial options. Some lenders will not be as keen to approve your application if your credit score is low, because you may not be seen as a reliable borrower. The goal for most is to have good credit, but what happens if your credit is bad?
Bad Credit Lending Options
If your credit is bad, and you’re looking for credit, your options are fairly limited. Whilst most lenders may reject you for mortgages, credit cards and loans, there are sometimes specialist credit options available. These are things like mortgage and loans with a guarantor. Your guarantor guarantees your application, and works sort of as your financial advocated. They state that should you be unable to meet repayments on your loan/mortgage, they will cover the costs for you. However, these bad credit lending options usually come with a higher interest rate. So, whilst there are options open to those with bad credit, it’s ideal to work and improve it so you can get better rates in the future.
How to improve your Credit
Whilst there’s no quick and easy way to improve your credit, there are some things you can do to get it moving. One thing, that is easy to do, is register on the electoral role. By doing this, you’ll take a step in the direction of good credit. It can be really valuable to your credit score to make sure that you are frequently checking your credit profile. The key is to look for any potential errors or financial links (if you’re linked to someone with bad credit it can bring your own score down). Monitoring your credit profile is essential. Making sure all your debts are cleared can help improve your credit score as well. Finally, loan products like guarantor loans can help improve your credit. If you make regular repayments on your loan, you can improve your credit. Many use their guarantor loans as bad credit loans as debt consolidation loans, to clear their debt into one single manageable payment.
To get approved for financial products and get better rates on them, good credit is key. So, make sure you understand and improve your credit if need be!