Day

April 21, 2023

How to Build Your Credit Score

You know it’s important, but are you really sure what a credit score is?

Having a good credit score is crucial for your future. While it may seem a long time away, you’ll rely on a good credit score when it comes to applying for things like a credit card or a mortgage.

But we’re not surprised that it seems confusing. Sometimes, it can feel like it’s made unnecessarily complicated, but we’re here to tell you that it’s as easy as this…

What is a credit score?

A credit score is essentially a figure that determines your affordability. A credit score is determined via many factors in your credit report, which include your past record of repaying debts, how much you use the credit already available to you, and whether you’ve registered to vote.

Why do you need a credit score?

Banks look at an individual’s credit score when considering lending for things like a mortgage on a home. It will be used by other lenders too, such as when applying for a car loan, credit card, or any other type of credit.

It’s worth noting that having no credit history is just as negative as a poor credit history, as a blank credit history doesn’t show the lender any evidence of you having made reliable repayments in the past.

Does my student loan impact my credit score?

No. Your student loan does not affect your credit score or appear on your credit report. But this does not include other types of lending, such as a student overdraft.

Why do I have credit scores with different companies?

Unfortunately, it can get a little confusing when trying to build a credit score, as there are multiple companies that calculate them.

Luckily, there are three main companies that most lenders use to determine your affordability: Experian, Equifax (Clear Score), TransUnion (Credit Karma).

When looking to build your credit score, we would recommend focusing on these three accounts – including making sure all your details are correct.

What can I do to improve my credit score?

There are some simple things you can do right away to ensure your credit score is accurate.

Get on the electoral roll
You may have forgotten to do this, especially if you have been moving around a lot for university. But ensuring you’re on the electoral roll and registered to vote is important for your credit score, and it’s really easy to do online.

Update your details
Ensuring all your details are correct is another easy step to help boost your credit score.

Pay your bills on time
Be reliable in paying your bills on time, and this will tell lenders that you are responsible with the credit you are lent.

Never use a payday loan company
Not only are payday loans terrible for repayment costs, but they are also a red flag to other lenders when they appear on an individual’s credit report.

Never use a credit card to withdraw cash
This suggests to lenders that you’ve been in a financial situation that requires drastic measures. Plus, charges for doing so are extortionate.

Be wary of too many credit applications
An individual with multiple credit applications in a short space of time indicates to a lender that they are in a poor financial situation, and less likely to make repayments on any money lent to them. It’s okay to apply for credit for things you need, like a mobile phone contract, but never make lots of credit applications within a short period of time.

Written by the Warehouse Team