A credit score is a reflection of an individual’s financial wellbeing, and is used by lenders to assess their risk when sanctioning loans and credit. Your credit score can affect various areas of life, and it’s important to have as good a credit score as possible.
So why would you need a good credit score, and how do you access the information in your credit record?
There are various reasons why you should aim to have a good credit score, but one of the main benefits is that it opens up a broader choice of financial products. Loans are typically cheaper and easier to obtain when your credit record is good, which can make life decisions and events run more smoothly.
If you want to buy a house, for example, and your credit record is good, the choice of mortgage products will be greater – they may offer more flexibility, for instance, a lower interest rate, or generally more favourable terms.
So what constitutes a good credit score?
The three main credit reference agencies in the UK are currently Equifax, Experian, and TransUnion (formerly Callcredit). If you default on a loan or credit card repayment, the provider will inform one or more of these agencies, and your credit record will be marked with the default.
To find out if you have a good credit score you need to check your credit report with each of the above credit reference agencies, as they typically hold different pieces of information about you.
Lenders don’t necessarily use the same agencies, and to obtain a clearer picture of your financial health, it’s worthwhile checking with each agency individually. You can do so by registering on their websites, where you’ll also find other credit-related services and options.
As we mentioned earlier, if you apply for borrowing the lender will scrutinise your credit record to assess whether you’re a risk for late or non-payment. If they see a default or other marker that means you’ve missed repayments in the last six years, they may charge you a higher interest rate or reject your application.
This can severely limit your financial options if you want to make a significant purchase, such as a property or a vehicle, but also for smaller items such as a mobile phone contract. If your credit score isn’t as healthy as you would like, however, there are steps you can take to improve it.
Firstly, you should check that all the information held on file is correct, as mistakes can be made by lenders. If you spot an error get in touch with the lender directly, or the credit reference agency, and explain the situation.
Also make sure you’re on the electoral roll, as lenders use this to confirm your identity. It’s also advisable to check whether you’re linked financially to another person – perhaps a partner or family member. If their credit rating is low, it can negatively affect yours.
Paying your credit card and other bills on time is also instrumental in helping you build up your credit score, as it shows you can handle debt responsibly and instils confidence in lenders.
For more information on how a good credit score can help you, and how to improve your credit rating if necessary, please get in touch with our expert team. Scotland Debt Solutions can offer you a free, same-day meeting, and we work from offices around the country.
The Register of Insolvencies is a public register that documents Trust Deeds until five years after the discharge date and includes personal details.
Joint Trust Deeds don’t exist, however, if you want to run a Trust Deed that encompasses debts as a couple, this will be two individual Trust Deeds.
Our Scottish based team can help advise you on your debt problems.