When it comes to taking out credit, you can put yourself at an advantage if you check your credit rating beforehand. This is because if you know what your credit score is, you’ll have a better idea of which types of credit offer you’re likely to be accepted for.
Not everyone checks their credit score regularly, and some people have never looked into their credit rating. These individuals may therefore not know that you’re entitled to check your credit score for free, with a number of organisations. We’ve explored this topic in more detail below:
What is a Credit Score?
Your credit score, or credit rating, is a number that’s used to give a rough idea of how you manage your finances. Lenders can look at your credit score, and get an impression of your financial history. This in turn can help them determine if you’ll be a reliable borrower. Essentially, your credit rating will often be a factor in whether a creditor will lend you money.
Do bear in mind though that your credit score won’t be the only thing a lender will look at when assessing your application. And when they do consider your rating, each loan provider will have their own criteria and lending requirements. So a poor credit score to one lender could be an acceptable score to another.
Generally speaking, a higher credit score will mean you’re more likely to be accepted for credit, and will often be offered a better interest rate. However, this is not always the case, and you should be careful about how many lenders you apply with, as too many rejected applications can impact your credit score. That’s why it can be a good idea to apply with a broker like us - your application with us won’t affect your credit rating. When matched with a lender, your application with them may include a full credit check, which can impact your score.
What Influences Your Credit Score?
There are many factors that can make a difference to your credit score. Some things can help improve your rating, while others will negatively impact your score. You should thus ensure you know what these factors are, and do your best to implement any techniques that increase your score, while avoiding anything that will lower it.
Factors That Can Improve Your Score
In terms of boosting your credit rating, there are several easy things you can do. These include borrowing within your means, and keeping your credit usage as low as possible. If you’re constantly taking out credit, or have a large amount outstanding, this can look bad to lenders. And if you do have older credit accounts, these will ideally be well managed - they should be used consistently, not sitting stagnant for years.
When it comes to borrowing, having no credit history can be just as bad as having a poor credit history. It can therefore be a good idea to set up payments as direct debits where you can, and ensure you pay them on time.
Another thing that can help improve your credit score is registering to vote. This may sound a bit odd, but by registering on the electoral roll, you can help verify that certain information on your credit file is accurate, thereby improving your score.
Factors That Can Lower Your Score
One of the main things that can negatively affect your credit score is missing due repayments, such as on loans or credit cards. Lenders will infer from this that you’re unable to manage your finances well, and are less likely to lend to you. And having little or no credit history can mean that creditors are unable to assess your credit history, making it more risky to lend you money.
Borrowing more than you can afford to repay, and exceeding your credit limit, may additionally lead to things like insolvency orders or bankruptcy. This too can negatively affect your credit rating. Even opening too many credit accounts in a short period of time can lower your score, as this can imply that you rely too heavily on credit.
How Can You Check Your Credit Rating for Free?
There are a few sites where you can check your credit score for free in the UK. Perhaps the most well known is the three main credit reference agencies in the UK - Equifax, Experian, and TransUnion. There are also independent sites such as Credit Karma who offer free credit score checks.
Each organisation will use slightly different criteria when it comes to calculating your credit rating, and their rating system may differ too. For instance, a score of 820 would be considered excellent with Equifax, while with Experian, this would only be a fair score.
Your Credit Score and Car Finance
As you can probably guess, your credit score will affect your car finance application. If you have a lower rating, you may be turned down by more lenders, and could be offered less favourable rates. But this doesn’t mean that anyone with a bad credit score can’t take out vehicle finance. There are many lenders who will look at factors alongside your score when making a credit decision, and may still lend to you.
Bad credit car finance can make it possible for you to borrow money to purchase a vehicle, and can even help you improve your credit rating, if you’re able to keep to the repayments and make them on time. Get in touch with us today to discuss your vehicle finance options!
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