When you apply for a mortgage, car or personal loan or a credit card, the lender will run a credit check before agreeing to lend you the money.
Your credit report includes information such as your address, date of birth, and whether you’re registered on the electoral roll. It will also register how much debt you owe overall, including mortgages, overdrafts and any joint loans you may have.
Missed or late payments also show, as will county court judgements, whether you’ve been declared bankrupt in the past or if your home has been repossessed.
You can check your own credit score without affecting it and it’s also possible to run a ‘soft’ credit check to assess how likely you are to be accepted if you go on to apply for a credit card or personal loan.
Having a good credit score is vital if you want to get a mortgage, car loan or qualify for the best credit card offers. But how do you know what your score is and, more importantly, how you improve it?
There are several credit reference agencies in the UK, with Experian, Equifax, Credit Karma, TransUnion and Clearscore among the biggest.
It’s usually free to view your credit score, but some agencies will charge a fee if you want to see your full report. Experian offers a 30-day free trial, allowing you to access this service for a limited time without cost.
Some agencies will also provide you with tips and tricks for improving your credit rating.
There are a few simple tips if you want to put yourself in the best position possible ahead of applying for a loan or mortgage.
- A good credit rating comes from using credit and being reliable about paying it off. You can do this without incurring interest on debt if you use a credit card sensibly, spending a little each month and paying the balance off in full. Be careful not to overspend or miss a repayment, that’s when debts can start to build and your credit score will suffer.
- Registering on the electoral roll is also important to earn a good credit score – it confirms your current address, adding credibility to you as a lending prospect when applying for a loan or credit.
- Pay bills on time and in full.
- Check your credit report for mistakes. You can usually apply to the agency to remove anything wrongly recorded. Checking your report regularly will also alert you if anyone is applying for credit in your name or is using your identity illegally.
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