Why Is Good Credit Important?
One of the best financial decisions you can make is to increase your credit score. Many people will overlook how important having a high credit score can be for many aspects of your life. You can access a wider range of products and services and also find cheaper rates. If you have bad credit, then you should try to increase your credit score to enjoy good credit perks.
What is a good credit score?
A good credit score can depend on a number of factors such as personal information, financial history, going over your credit limit, missed payments, defaults, Country Court Judgements and much more. Your credit score is like your financial CV and shows how well you’ve managed your finances in the past. There isn’t just one number which shows a good credit score as much different credit referencing use different scales. You can use credit referencing agency such as to check your credit score for free and they will provide you with a number and also a ‘poor to excellent rating’.
What are the benefits of having a good credit score?
Credit can affect your mortgage application
Your credit score can affect where you live and the type of house you can get. Mortgage lenders will run a credit check on you to determine how much you can borrow. They want to be secure that you will not default on your mortgage payments. If you have a history of making late repayments, then they consider it riskier to lend you money. Your credit score can also affect the interest rates that you are offered when you are accepted for a mortgage. Also, if you aren’t ready for a mortgage, your credit is usually also checked by landlords when renting a property.
Get a better car finance rate
Car loan providers also run a credit check to determine whether you qualify for finance or not. Having a better rating can reduce the amount of interest you will pay and will reduce the amount you need to borrow overall. Applying for car finance with bad credit can be trickier, however, there are also many bad credit car finance specialists who work with a specific panel of lenders. These lenders use a mixture of credit and also affordability to get you approved. Whilst APR rates can be higher for bad credit applicants, it can also help to improve your credit score if you continue to make all your payments on time and in full. You could then refinance when you are further into your credit agreement and benefit from a lower interest rate.
Increase your employability
For some industries, it is a requirement that they perform a credit check on their employees. For example, working in finances for a law firm can mean that you would have to legally undergo a credit check prior to employment. They may check your credit to make sure you have a good track record of managing your finances, because it may be a risk to let you manage money and also to check that your financial behaviour won’t impact your performance work.
Business loans can be affected
If you’re looking to start your own business, then most start-up businesses require a sizeable cash investment. If you’re looking for a small business loan, then you will require a credit check.
How can you easily increase your credit score?
- Make sure you pay all your bills on time and in full. Missed or late payments can seriously negatively affect your credit score can impact your ability in the future.
- Register on the UK electoral roll on the GOV.uk website. The electoral roll helps potential lenders to verify that you are who you say you are and also your living address.
- Use a credit card little and often to increase your credit score. You can also consider a credit building card if you have had no credit in the past.
- Check your credit file for any mistakes or fraudulent activity. If you find anything that doesn’t look right, you can contact your credit referencing agency to challenge this.
- Avoid making multiple heard search applications in a short space of time. You should try to stick to soft search applications if you want to shop around for finance.