The Importance of having good credit

Why Is good credit so important?

If you want to get a mortgage for a house or a student loan to pay for a course—or if you just want to spread the cost of vehicle maintenance on a credit card—you’re going to need a lender to extend you a line of credit.

You’ll also need to be worthy of that line of credit. Your creditworthiness is defined by your three-digit credit score and is the key to your financial life. That’s right, underline and highlight the word KEY!

Your creditworthiness is defined by your three-digit credit score and is the key to your financial life. That’s right, underline and highlight the word KEY!

Good credit can be the make-or-break detail that determines whether you get a mortgage, car loan or simply make purchases you may not be able to immediately afford.

Even if you’re not in the market for a loan, good credit can have a major impact.

Landlords, insurers and employers frequently use credit information as a litmus test to see if the people they’re dealing with are reliable and responsible. Bad credit can suggest you’re a risky bet.

Okay…so you are thinking….

What has this got to do with me?

• Those missed payments from EE (Mobile provider) during your time at Uni

• Those high interest credit cards that credit companies were throwing at you like Tic-Tac’’s when you had less financial responsibility…and you took the bait.

• In my case that ONE missed energy bill payment that I missed when I was renting

• Going into your unarranged overdraft facility every month

• Those Klarna payments be stacking up chileeeee

Yeah!

You see all that clownery you were doing when you thought you were invincible, you’ve got to remember that the clown will come back to bite.

Where do I check this stuff?

I recommend Check My File where you get a multi agency credit report across Experian, Equifax and TransUnion. First 30 days are free for new customers.

What Is a good credit score?

Different credit bureaus might use different scoring models. But, in general, it is accepted that a credit score above 700-750 is generally considered good, while one below 650 is considered to be either fair or bad.

Congratulations if you have made it this far. You are now on your way to master this thing called ‘Adulting’ three cheers!!!

How do I improve my credit score?

So you want to buy a home? You’ve seen a vehicle, but cant afford to buy it outright? Here are some things you can do from today to improve your credit rating.

1. Register on the electoral roll

Get your name on the electoral register but remember to opt out of the “open register” that shares individuals’ contact details with companies so you don’t get lots of junk mail.

Make it clear that you only want to be listed on the “full electoral register”.

2. Pay your bills on time

Paying the mortgage and credit card and utility bills on time is the best way of proving to lenders that you can manage your finances.

3. Pay your rent on time

A scheme called the Rental Exchange Initiative, allows private renters to boost their Experian credit score for free.

You pay rent to a middle agent called Credit Ladder, which passes it onto the landlord or letting agent, and then lets Experian know the payment has been made on time.

4. Use a credit card little and often

This is one of best ways for you to improve your credit score, as it shows you can manage borrowing on a regular basis.

Having no credit to your name at all gives lenders nothing to work with. Be sure to pay off your bill each month.

5. Check if you are linked to another person

Being linked to someone else financially through a joint account, mortgage or loan could affect how lenders view you if they have a poor rating.

If you end financial ties with someone, contact the credit reference agency to get them removed from your own credit report. You can check this in the “financial associations” section.

6. Use less of the credit made available to you

If you have a credit limit of £3,000, for example, and you’ve spent £1,500 then your credit use is 50%. As a rule, it’s best to keep this ratio under 30%.

If your credit limit is reduced (because, say, you have been struggling with repayments), a lower limit may increase your credit utilisation rate – so aim to stick to 30% or under.

7. Take out a credit builder credit card 

If you have a bad credit rating, you need to build a decent recent history to show that you can be responsible with credit. The catch-22 is that because you have a poor score, getting credit is difficult.

However, with a credit builder card, this is easier as they typically accept those with low scores. Be warned: you must pay the card off in full each month as high interest rates – from 19.9% all the way up to 59.9% – are normal.

8. Don’t withdraw cash on credit cards

Many lenders see this as evidence of poor money management. Not only that, the interest can be very high.

9. Pay for insurance upfront

Paying for home insurance or car insurance in monthly instalments rather than upfront can affect your credit score.

You are entering into a credit agreement – a type of high-interest loan – so the insurer will look at your credit file to check if you can pay them back.

These “hard checks”, visible to other lenders, can bring down your score. Paying monthly is also more expensive.

10. Fix errors on your credit record

Write to any company that you believe has mistakenly registered a defaulted payment on your report to ask for it to be removed, otherwise you’ll be taking it to the Financial Ombudsman Service.

Errors such as an incorrect name or address can be removed from your credit report by disputing the matter with the credit reference agency – as long as the address is not associated with any of your accounts.

You’ve got this!!

Let me know if this has helped you!

Yas xox