Everyone has a credit report, and by definition a credit score too. And when you apply for new credit, most lenders want to make sure you’re able to pay it back before they commit to giving you credit.
Planning your financial future is something that can benefit us all – whether it’s making a budget for the week ahead, working out how much we’ve got left over after monthly bills are paid, or making a strategy as to how to save up enough money for a mortgage deposit.
What is a credit score?
Your credit score is the number that lenders calculate, taking the information on your application form, along with the information in your credit report from a credit reference agency like Experian, to work out whether or not you’ll be a responsible borrower and likely to repay what you owe them. They give relevant items a value, using their own unique formula, which gives you a credit score.
How fixed is this Credit Score?
Your credit score is not set in stone. Firstly, different lenders can score differently, using their own formulae depending on their own factors and what they consider to be important – there really is no ‘magic number’. Secondly, your own credit rating changes along with your own financial behaviour – so you can take steps to improve it yourself.
The Experian Credit Score is a guide to help you understand your credit report, and how past credit management can impact on future credit applications and for you to monitor your progress as you get your finances in order before you apply.
What else can and can’t affect it?
Your credit score could be affected by the credit-worthiness of anyone you share a credit account (eg: a mortgage, a bank account) with, regardless of if you are related. This is called a financial association. However, unless there’s a financial association, your credit score won’t be affected by your family’s credit history, or that of anyone who shares your address.
Checking your own credit report won’t affect your credit score.
Keep an eye on it
Staying within your credit limits and paying your credit bills on time – every time – is important, as missed or late payments can matter. They can make you look unreliable, stay on your credit report for at least six years, and this can have a big impact on your credit score. If you are applying for credit, it’s best not to make applications too close together, as it could look to lenders as though you’re under the kind of financial stress that might make repayments tough.
You can make sure your credit report is up to date and that the information on it is accurate. If you do find anything that needs correcting, contact the relevant lender and ask for an amendment. Even small details like the way your name and address is recorded could have a significant impact. Also, check that you’re listed on the electoral roll.