Credit Scoring

It is fairly well-known that it is important to have a good credit score because if you want to borrow money, all lenders have to do a credit check. They will take a look at your credit report and they will use it to decide whether they will lend you money. However, it is also important to realise that there are some lenders, that although will look at your credit report, will not use your financial record to decide whether to lend you money. They will actually just be looking at your credit report in order to do an identity check. It is worth knowing who will check and who will not though, as then you will know who you will be able to borrow from, should you struggle with your finances and find that your credit report is not in a good shape.

Which Lenders Care About Credit Scores?

It is a good idea to know which lenders will be interested in your credit score and this will allow you to be able to decide whether it is important for you to do your best to have a good one. You will find that all traditional lenders, high street banks, mortgage companies, credit card companies, personal lenders and places like this will all want to look at your credit report. They will want to make sure that you are capable of repaying them and so they will be interested in checking out your credit report to see whether they feel that you will be able to do this. They will look at your previous borrowing and see if you repaid on time as well as looking at your current payments to make sure that you are not getting behind. They will also be interested in looking at whether you are borrowing money elsewhere as they will want to check to see whether you are likely to miss their repayments due to being overwhelmed with repaying others.

Which Lenders do not Care About Credit Scores?

There are some lenders though, that will not look at these things. They are happy to lend to people even if they do not have a good credit history. This means that even if you do not have a good credit record, you will still be able to borrow money. These lenders tend to provide payday loans and guarantor loans. A payday loan is a short term loan and you will only be able to borrow up to £1,000 until you next get paid. They can be useful for emergencies as long as you are confident that you will be able to repay them. The guarantor loans are for up to £10,000 but you will need to find someone that will be prepared to cover any repayments that you cannot manage yourself.

So, although there are some options, they are limited and you will need to think about whether you feel that you will need to borrow money and how much and whether these loans are likely to suit your need or if you think that you will be more likely to want a mortgage or credit card and in that case you will need to make sure that you have a decent credit record. It can be best to have a good credit record anyway because you will benefit personally. This is because making payments on time will mean that you avoid late payment charges and not taking out too many loans will mean that you avoid loan charges and interest payments on them. So as well as having access to more products you will also pay out less money as well.

It is often said that we should be doing things to try to improve our credit score. However, it might all seem like a lot of hassle and you may wonder whether it is even something that you should be that bothered with. It is good to question these things but also you should think about whether you will benefit from giving it some thought.

What is a Credit Score?

It is good to start by having a good understanding of what a credit score is. It is actually not a thing at all, but we do all have a credit record. This shows details of our borrowing, missed payments, regular payments and things like this. It is something which will allow people to judge us and decide whether they are prepared to take us on as customers. There is no formal credit scoring process, but different people will judge us in different ways by looking at this information. These will be people such as lenders, landlords, employers, insurers and utility suppliers. Therefore, it can be important to make sure that they will have a good impression of you.

What Can I do to Improve it?

It is wise to start by looking at your credit report and making sure that all of the information on it is correct and get anything that is incorrect changed. Then if it is all correct see whether you feel that there might be improvements to be made. You will not be able to change things that happened in the past, so missed payment etc cannot be covered up. However, you can improve things now to show that you are changing your habits and more in control of your money.

To start with you could try to repay some of your loans early and that will show that you are capable of managing money well and that you are taking responsibility. It can also be a good idea to not take out any more loans or not too many. If you are thinking of applying for one, try to check with the lender first to see what the chances are of you being turned down as this will show up and work against you. So, try to only borrow if you are confident that you will get the money. However, avoiding borrowing can be even better.

You can also do other things to improve the look of your credit report. Make sure that you are registered to vote as this is often used as part of your identity checks when you apply for a financial product and you may be turned down if you do not appear on the voters role. Also make sure that your name is on some utility bills or insurance policies and that they are being paid on time so that there is some evidence that you can make payments on time.

Some of these checks and changes are easier than others. It is wise to consider all of them though as they could make a big difference to your future. It could impact your ability to borrow, move house, take out insurance, get a job or switch utility supplier. If you do not try to keep your credit score looking good you could find that your future is more expensive and lacks so many opportunities compared with the situation where you had a good credit report. You do not have to make all of the changes at once and you can take a step by step approach. By making sure that you are making payments on time and are not borrowing too much though, this will have a general positive impact on you, because you will be able to avoid paying so many fees, which you find you will get if you miss payments and repayments and if you borrow money.