What is a good credit score?

Your credit score provides you with an idea of how firms may see you when you demand credit.

A more eminent score means moneylenders see you as a lower risk. So, a great score will be good news if you’re expecting to receive a new credit card, applying for a loan, or even a mortgage. Whatever you need credit for, making sure your score’s good, or even better excellent means you’re more possible to be accepted and granted better rates. Here, we’ll take a look at what a good credit score is, its calculation, and what factors make it ‘good’.

No prophecy

There’s no ‘prophecy when it comes to your score. Several companies will be looking for different points in possible customers, so while you may be one lender’s cup of tea, you may not meet up with all the points for another. We present a score from between 0-999 and consider a ‘good’ score to be anywhere between 881 and 960, with ‘fair’ or average between 721 and 880. Before you apply for credit, it’s a really good idea to check your free Experian Credit Score, so you can make more informed choices when it comes to applying for credit.

How exactly is a credit score calculated?

When applying for credit, lenders will look at data from your credit report, application form, plus any information they hold on you (if you’re an existing customer). All this data is then used to calculate your credit score. Every lender has several ways of calculating it, largely because they all have access to different information but they also have different lending rules.

Commonly, the higher your score, the better your possibilities of being accepted for credit, at the best rates.

Credit reference agencies (also known as CRAs) like ourselves, calculate a version of your credit score. How each CRA calculates this varies but there are sure factors they all consider, including – how much you owe, how frequent you apply for credit, and whether your payments are made on time. You can read more about the factors that influence your score in our guide to what affects your score.

  • Payment history – If you have a record of paying bills on time, it’s solid for your credit score. On the flip side, if payments are made over 30 days late it will typically be reported by your lender and could wreck your credit rating. Any accounts in arrears, county court judgment(CCJs) against you or bankruptcy will all seriously dent your score. Most negative marks – including late payments – will be on your file for seven years

  • How much you borrow – The principal matter isn’t the amount obtained or borrowed, but how many of your available credit lines you’re using. This is termed credit utilisation ratio, which sounds like complicated jargon but is simply a percentage calculated by dividing the amount you want to borrow by your credit limit. Lower utilisation ratios are commonly better because it shows you’re not financially stretched. To drop the ratio pay down credit card balances or increase card limits

  • The extent of credit history – Increase your credit score by proving you can run credit accounts well over a lengthy period. While there is no fast fix, becoming authorised on another current account the primary holder has held for years could help

  • New credit – When you apply and open a new account, your credit records is reconsidered. This leads to a difficult search on your credit file. Various inquiries in a short space of time can reduce your credit score because it could signify you’re desperate to borrow and keep getting turned down

  • Type of credit – Having mixed credit accounts, such as cards, loans and a mortgage can improve your score. This is because it tells lenders you can responsibly use credit. It doesn’t mean you should take out a loan to increase your rating though!

How can you get a good credit score?

Good Credit Score
Hit a good credit score

There are lots of things you can do to further improve your score, but it can take time and patience, and some willpower too.

Ways to Improve your score:

There are plenty of things you can do to help improve your score, but it can take time and patience, and some willpower too. While there is no fast way to fix or improve your credit score, there are various ways to nurture your rating over time. Here are our top tips:

  • Electoral Role Registration:

It is one of the easiest ways to boost your score. Getting on the electoral roll helps companies to confirm identity. It’s free to register on the electoral commission website.

  • Demonstrate financial stability 

The most excellent way to improve your credit rating is to manage your debts well. Pay your accounts on time and in full each month. This tells lenders that you’re a safe bet and can manage credit responsibly, stick to the payment deadline, and stay within your credit limit and not off-limit.

  • Review your credit report annually

Review your report frequently to be certain if all the information held about you is correct. Correct every error if you spot any.

  • Limit the number of your application

Limit the number of credit applications you do. Don’t be lured into making too many in a short space of time as this can make lenders view you as overly reliant on credit and a higher risk. Each application you make will record a difficult search on your credit report. Companies can see this, so it’s a good idea to put a space for any applications out.

  • Close old and unused accounts

Close old and unused accounts. If the amount of credit available to you is too high, lenders may think you won’t capable of handling it anymore.

  • Disconnect financial links with previous partners

If you have any joint financial products they might affect a lender’s decision. Ask credit rating bureaus to add a ‘notice of disassociation to your file if you have cut ties with an ex-partner.

  • Consider a credit builder card 

Prove you can manage your debts sensibly and it should grow your credit score. Interest rates on credit cards for low credit scores are generally high so only think of this option if you can keep your borrowing under control.

More ways to improve credit scores are: Keep up with your payments, only borrow what you know you can afford.

  • Keep an eye out for fraudsters. Their actions could hurt your score badly. So, try to review your credit report for any unusual signs.

Click here to reach out to one of us our team members on how you can fix your score if it is way beyond bad.

 

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