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What affects your credit score?

Understand what causes your credit score to change

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Written by  Victoria Russell
5 min read
Updated: 16 Nov 2023

Your credit score determines whether you’ll be offered the best deals for mortgages, loans and credit cards, so knowing how your financial decisions affect it can be very useful

For many, the term 'credit score' might seem like a financial jargon that has little relevance to their daily lives. But this couldn't be further from the truth. Your credit score is more than just a number. It's an essential tool that lenders use to determine your creditworthiness when you apply for loans, mortgages, and credit cards. Understanding your credit score is crucial as it can significantly impact the financial decisions you make and the opportunities available to you. 

The Importance of Knowing Your Credit Score 

Knowing your credit score provides you with a clear picture of your financial health. It can help you understand how lenders perceive you and the likelihood of your loan or credit card applications being approved or rejected. If your credit score is low, don't despair. It's important to start understanding why this is the case and begin taking steps to improve it. This knowledge puts you in a stronger position when applying for credit in the future. You can explore why your credit score is low and take steps to improve it. 

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Benefits of a Good Credit Score

 The benefits of having a good credit score are manifold. They include: 

  • Better rates on borrowing: Lenders are more likely to offer you competitive interest rates if you have a good credit score. This can result in significant savings over time. 

  • Easier approval for mortgages: A high credit score can make it easier for you to get approved for a mortgage, enabling you to purchase the home of your dreams. 

  • Cheaper car insurance: Some car insurance companies consider credit scores when determining premiums. A good credit score may result in lower insurance costs. Additionally, a good credit score can give you more options for car finance. 

Checking Your Credit Score 

You can check your credit score directly with any of the three main credit reference agencies; Equifax, Experian and TransUnion. Alternatively, you can also check your credit score for free with our Credit Monitor service that uses information from credit reference agency TransUnion to calculate your credit score and gives helpful, personalized hints and tips on how to boost your rating. 

Factors That Impact Your Credit Score 

Your credit score isn't an arbitrary number. It's calculated based on several factors including: 

  1. Payment history: Timely payment of bills is crucial. Late or missed payments, county court judgements against you, using all your available credit every month, not being on the electoral roll, making too many applications in a short period, not closing unused credit accounts, and not having a long credit history can negatively impact your score. 

  2. Amount owed: The amount of debt you owe can affect your credit score. It's advisable to keep your balances low. 

  3. Length of credit history: A longer credit history typically improves your credit score. 

  4. Credit mix: If you have shown you can handle different types of credit, this can give your score a significant boost. 

  5. New credit: Too many credit applications in a short period can harm your score. 

Debunking Credit Score Myths 

There are several myths about factors that do not affect your credit score. Checking your credit score, being denied credit, changes in income, and personal information do not impact your credit score.

 Tips to Improve Your Credit Score 

There are lots of ways to boost your credit score. Here are a few tips: 

  • Register on the electoral roll: If you’re currently not on the electoral roll, or you’re moving house, make sure you register or re-register as soon as possible. 

  • Review your credit report: Regularly check your credit report for errors and dispute any inaccuracies. 

  • Pay bills on time: Timely payments are essential for maintaining a good credit score. 

  • Build your credit history: If you’ve not applied for credit before, a credit-builder credit card could help here and start you on the path to a stronger credit rating. 

  • Close unused credit card accounts: Keeping unused credit card accounts open can negatively impact your credit score. 

Other Useful Guides

Check Your Credit Score with Credit Monitor 

It’s quick and simple to check your credit score online using our free Credit Monitor service. We suggest checking your credit score regularly, in the same way you might with your bank statements or utility bills. Knowledge is power, and understanding your credit score is a step towards financial empowerment. So, don't wait. Start today, and take control of your financial destiny. By understanding and managing your credit score, you're not just taking control of your present financial situation, but also paving the way for future financial stability and opportunities.

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