What is a good credit score and why your credit report matters?

25 January 2023

 

When you make a purchase on credit, a domestic item, a car or a mortgage, the lender will take a keen interest in your credit report and your credit score.

 

What is a good credit score and why your credit report matters?

Your credit report and the score generated by the information it contains exist to help loan companies ascertain whether you are a good customer to lend to. It will tell them how much debt you have and how good you are at managing it. Do you pay the amount required on time or have you been late or missed any payments?

 

What is covered in a credit report?

The report will check that all your personal information is correct. They check that you pay the correct amount on time to your creditors. The report will look for dormant accounts that need to be closed.

The report will also tell you the type of credit you have, for example, credit cards, mortgages, and loans. It will also list the outstanding balances on all these accounts.

 

How far back does it go?

One credit score provider, Check My File, covers the past 6 years. Check My File combines information from the top 4 providers, Experian, Equifax, TransUnion and Crediva into one report.

Looking back over previous years will show you how you used credit in the past and could help you restructure your debt in the most cost-effective way.

 

What else can you find out?

  • You can find out what names are associated with you and your credit and remove them if they are incorrect.
  • You can check if you are on the electoral register. 
  • You can check for any fraudulent activity.
  • You can see any Court judgements or insolvency records you have against your name.

 

How do I clean my report so it’s the best it can be?

Contrary to what you may think, it’s not all about having no debt. It’s more about how well you manage the debt you have.

  1. Make sure you are on the electoral register at the correct address.
  2. Make sure you make all your payments are made on time and in full.
  3. Check that there are no errors on your account. Misspelt names or incorrect address information.
  4. Try to keep a few accounts open for a decent length of time. This will demonstrate you can maintain a long-standing account.
  5. Avoid moving home a lot. This will depend on your circumstances, but frequent address changes may lead lenders to believe you have trouble keeping up with rent payments.
  6. Try not to max out your cards. Low credit utilisation is another sign of good money management.
  7. As mentioned before it’s beneficial to demonstrate that you can manage credit so having a credit card that you spend wisely on, paying the full balance each month is a great way to build up your score. 

You don’t need to get a credit report to apply for a mortgage. However, it’s a good idea to check your report and do what you can to improve its health before you apply. Thus, giving you the best chance of being able to borrow the amount you need to buy your new home.

 

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