Your credit score can have a big impact on your life, as it can influence how much you can borrow in the future and the types of loans and rates you will be offered. Essentially, your credit score is a reflection of credit history.
When you have loans and credit, the information on the amounts and your payment history are provided by your lender to the main credit reference agencies each month. This data is then analysed to help create your credit. It takes into account your total debt, repayment history, number of open accounts and many other factors. So, if you have been late repaying your debt in the past, that will be represented in your credit score.
This means that if you have a poor credit score, lenders will be less likely to lend to you, as you would be seen as less likely to repay the debt.
Let’s put that into context – rough figures to illustrate its importance – correct when published.
With an excellent credit score on a £1000 unsecured loan you might be paying an interest rate of around 2.8% – so over 5 years you might have monthly payments of £19 per month which means you have paid back £72 in interest
With a Fair to Poor credit score on a £1000 unsecured loan you might be paying an interest rate of around 5% – so over 5 years you might have monthly payments of £18 per month which means you have paid back £132 in interest
What about a payday loan? These are not normally kept for 5 years but as a comparison, with a very poor score on a £1000 unsecured loan you might be paying an interest rate of around 250% – so over 5 years you might pay £11,500 in interest
Those numbers really illustrate the importance of keeping a good credit score
As well as credit scores, lenders will use your credit rating to see how credit worthy you are. Credit scores are strictly numerical, ratings show where you are on a scale. There isn’t a huge difference between the main credit agencies which provide this information to lenders. but lenders may use either, or both.
It is always worth checking your credit score, the rating and the raw data each agency holds to see whether or not you can work towards improving it. However, when you check it, make sure it is a check that will not affect your credit score – see below for a service which lets you see three agencies at one time.
Regardless of how high or low your credit score is, you should always practise sensible finance to maintain it. This means making all of your repayments on time, and repaying any outstanding debts that you may have.
Building your credit score
There are also a few more steps for you to take in order to maximise your credit score.
First of all, make sure you are registered to vote. Lenders will use the electoral register to check your name, address and previous addresses.
You also need to prove that you can borrow. A simple way to do this is to take out a credit card with a low limit. This means you are more likely to get approved, and provided you repay the balance on time, can help prove you are able to meet repayments.
Paying on time! This may seem obvious, but actually paying the balance off on time proves you can make regular repayments. It is also important to stay within your credit limit. Your most recent credit history will be most important to lenders, so make sure you are making all your repayments.
You should not make too many applications to lenders or credit card providers. This could give the impression that you are struggling to get money, and so are less likely to be able to make repayments. If you want to compare lender rates, ask for a ‘quotation search’ instead of a ‘credit application search’. A ‘quotation search’ won’t affect your credit profile.
Finally, you should check your credit report to make sure there are no mistakes. Your credit report shows all the data held by the credit report agencies. Your credit score is just a summary of this data in a single number. Mistakes could include the amount of debt you currently owe or missed payments. There are a number of agencies and each will hold slightly different information. To see a summary from all the main credit agencies you canget your free credit search here. It covers three agencies and it’s free for 30 days but don’t forget to cancel as it costs £14.99 per month thereafter
Promise Money is a broker not a lender. Therefore we offer lenders representing the whole of market for mortgages, secured loans, bridging finance, commercial mortgages and development finance. These loans are secured on property and subject to the borrowers status.
More than 50% of borrowers receive offers better than our representative examples
The %APR rate you will be offered is dependent on your personal circumstances.
Mortgages and Remortgages
Borrow £270,000 over 300 months at 7.1% APRC representative at a fixed rate of 4.79% for 60 months at £1,539.39 per month and thereafter 240 instalments of £2050.55 at 8.49% or the lender’s current variable rate at the time. The total charge for credit is £317,807.66 which includes £2,500 advice / processing fees and £125 application fee. Total repayable £587,807.66
Secured / Second Charge Loans
Borrow £62,000 over 180 months at 9.9% APRC representative at a fixed rate of 7.85% for 60 months at £622.09 per month and thereafter 120 instalments of £667.54 at 9.49% or the lender’s current variable rate at the time. The total charge for credit is £55,730.20 which includes £2,660 advice / processing fees and £125 application fee. Total repayable £117,730.20
Annual Interest Rate (fixed) is 49.7% p.a. with a Representative 49.7% APR, based on borrowing £5,000 and repaying this over 36 monthly repayments. Monthly repayment is £243.57 with a total amount repayable of £8,768.52 which includes the total interest repayable of £3,768.52.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME
REPAYING YOUR DEBTS OVER A LONGER PERIOD CAN REDUCE YOUR PAYMENTS BUT COULD INCREASE THE TOTAL INTEREST YOU PAY. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Promise Money is a trading style of Promise Solutions Ltd – Company number 04822774Promise Solutions, Fullard House, Neachells Lane, Wolverhampton, WV11 3QG
Authorised and regulated by the Financial Conduct Authority – Number 681423The Financial Conduct Authority does not regulate some forms of commercial / buy-to-let mortgages
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