Your credit score is a number that lenders use to determine whether they should lend you money. Helping them better understand how likely they will get their back on time, and whether you should be given a loan, insurance, credit card, lease on a vehicle, store card, etc.; everyone has a personal credit score, and this is created from your credit history.
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It is essential that you have a decent credit score for your financial wellbeing: the higher your credit score, the less of a risk you are to a lender.
A generic score
A generic credit score is used by lots of lenders and businesses to determine the general risk of lending money. You can access your generic score using the same formula across all three credit reporting agencies – TransUnion, Experian, and Equifax.
A custom credit score
Developed for the use of individual lenders, who will rely on these reports along with other information, such as your account history; custom credit scores are unique to the specific business and can be applied to different types of lending such as auto lending, pay day lending or mortgage lending.
How to improve your credit score
It’s important that you understand your credit score, and the ways in which you can improve it.
There are some main elements that come from your credit report that can shape the overall results. Credit score factors include:
- The total amount of debt that you have to your name
- The types of accounts you have under your name
- The number of late payments or missed payments you have
- How long you have had your accounts
Once you look into these points, you will get a better idea of the elements of your credit history that have most significantly impacted your credit score. If you have a poor credit rating, you should look to make improvements where possible.
How to check your credit score
TransUnion, Experian and Equifax are credit agencies that will hold credit reports for you. For a good job, check all three at least once a year. They all have information on you that lenders will use.
Even small errors can cause problems, so it is very important that you go through your credit report with a fine-tooth comb.
- Check addresses on old accounts
- If you have previously held a joint account with someone, ensure you financially delink yourself from those accounts
- If you have any unfair defaults, fight your corner
- If you have been rejected, take another look at your credit report
- Cancel any unused credit/store cards, as these can count against you
What is a good credit score?
This can be anywhere between 881 and 960; fair or average is from 721-880.
What is the average credit score in the UK?
According to Experian, the average UK credit score is 797 out of 999, but it is worth remembering that scores can vary depending on the reference agency.
Before you apply for credit, it is always worth checking how you fare so you can make more informed choices.