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Do I really need to care about my credit score?

published: 18 November 2021
Read time: 5 minutes

Think your rating is something you can ignore? You're wrong - we look at why it's so important.

You may think you don't need to pay much attention to your credit score, but this isn't true.

A credit score is an important part of your personal finance management, and has the potential to make or break applications for cards, loans, mortgages, and other types of credit.

Here we take a closer look at why it’s so crucial.

It can affect how a lender views you

Your credit score shows how well you’ve managed  your borrowings over the last six years. This includes overdrafts, mortgages, credit cards, mobile phone contracts and hire-purchase payments.

Lenders use it to work out how ‘creditworthy’ you are, and how risky it would be giving you money. They want to see you spending wisely.

Having a low score – perhaps due to lots of unpaid bills – means you may find it more difficult to get credit, as lenders will view you as financially unreliable.

To find out more about how your score is calculated, head here.

Woman with phone smiling

It can have a make-or-break effect on lots of things

Your credit rating can help – or hinder – you from getting a credit card or loan. It can even impact on you getting a mobile phone contract.

With a personal loan, say, a low credit score could mean you get offered a lower amount, or get asked to pay a higher rate.

A poor credit score could also hamper your chances of getting a mortgage, and of buying your dream home.

Read more about who actually looks at your score here.

It can affect future decisions

As a default will stay on your credit file for six years, even if you clear the debt in full, this may mean you have to wait longer before making big decisions, such as applying for a mortgage. This, in turn, could potentially delay your first step onto the property ladder.

If the default was in the last three years, this is more likely to affect your application, and the type of lender you can approach. In this situation, you may find that only a specialist lender will be willing to offer you a home loan. At worst, you could find you don’t get accepted at all.

While a default that occurred four, five or six years ago can still affect you, the impact will usually lessen over time.

Engage with your credit rating

Given all of the above, you need to be proactive about engaging with your credit score.

The simplest way to do this is by getting hold of a copy of your credit report. You can do this for free with our Credit Monitor tool.

(We use data from credit reference agency, TransUnion, to compile your score and report via Credit Monitor).

You should check that all the information held on you is accurate and up-to-date. If you find any errors, get these corrected.

Once you’ve checked your credit score, you can’t sit back and forget about it. You have to keep checking it on a regular basis. By getting into the habit of checking your file regularly, you will get a comprehensive picture of your creditworthiness.

What can I do if my score isn’t up to scratch?

If your rating is not as good as you’d like it to be, you can take steps to clean up your record:

  • If you have financial links to another person on your credit report, but these are no longer relevant (if, say you have now separated from an ex-partner), you can get a ‘notice of disassociation’ added to your file to ‘un-link you.

  • If there are special circumstances behind a blemish on your file, such as a default caused by a relationship breakdown or being ill, or being made redundant, you can get a ‘notice of correction’ added to explain this.

  • Make sure you are registered on the electoral roll at your current address. Creditors use this to confirm you are who you say you are, and that you live where you say you live.

  • Pay all your bills on time.

  • Avoid high levels of debt.

  • For more tips on boosting your score, head here.

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