Improve your Credit Score
Updated: Aug 19
Let‘s Start with the basics, what is a credit score and why would anyone need to care about it?
What is a credit score?
A credit score is a number between 0-999 in the U.K. which will determine your creditworthiness. The higher the score, the better a borrower looks to potential lenders. A credit score is based on your credit history: how many open accounts your debt level, repayment and other factors. Lenders use credit scores to evaluate the probability and likelihood that you will repay loans in a timely manner.
Why would you need a good credit score?
The main reason to be concerned about your credit score is if you would like or need to take on a loan! For most people the biggest loan you’ll need is a mortgage. The better your credit score is, the better terms you will get with the bank. Benefits such as lower interest rates could make a huge difference on your monthly repayments. So if you’ve started on the wrong foot and don’t have the best score, and are wondering what you could do to start improving then you are in the right place.
Credit Score Influencers
Here are the main INFLUENCERS to your CREDIT SCORE according to Experian Reporting!
1. Average credit account age
The longer you have your credit accounts, the more your Credit Score could improve
2. Highest credit limit
Lenders like banks and financial institutions may set you a low credit limit if they think you might not be able to pay off any outstanding credit balances or if you'd struggle to pay off a big credit balance. A high credit limit can indicate that you're a low risk borrower. This is generally any credit above £1,000
3. Total credit balance
Having a big combined credit balance can reduce your Credit Score.
Lenders look at how much credit you have in total to decide if you're safe to lend to. Balances with ongoing repayments like credit cards and overdrafts may have more impact than balances on fixed repayment credit like loans.
4. Credit account balances
Having lots of individual credit account balances can reduce your Credit Score
5. Credit use
Available credit is the difference between your credit balance and your credit limit. Lenders measure your available credit use as a percentage and check how you manage your credit accounts.
Using more of your available credit may make lenders think you're reliant on credit or struggling with debt. Using less of your available credit may increase your Credit Score.
6. Credit applications
If you search and apply for lots of credit accounts in a six month period, lenders may think you can't live off your income and are reliant on credit. This can reduce your Credit Score.
7. Settled credit accounts
If you pay off a credit account like a loan or credit card in full and close it with a zero balance, the account is recorded as settled.
Hope you find this helpful on your journey to improve your credit score!