Why knowing your credit score is vitally important

There are many moments during our lives when we have to make costly purchases, buying a home, a car, paying for education or a wedding for example. It is when we try to get finance for these that our credit reporting history is under scrutiny.

Our credit history is built up of all the debt we have currently as well as previous debt. It gives potential money lenders details about how we have managed debt in the past. It also shows how much credit we have at our disposal to demonstrate how much we are in control of our finances. If we have a £6000 credit limit on our credit card but only have £1000 outstanding, it shows that we aren’t borrowing what we could, which is a positive sign for potential lenders.

Credit reporting data also shows how much we have left to pay on a mortgage or loan, how much we pay each month and shows if there any missed payments. Each of these factors has a points value which constitutes an overall credit score.  When we try and get credit our credit score is vitally important. A good credit score shows we are a better risk to the money lenders so we will have more people willing to lend us money and they will usually offer us credit at a lower interest rate. A poor credit score shows that we have struggled to manage our debts in the past so they may be reluctant to lend us more money in the future. A poor credit history does not preclude us from getting credit but may mean the usual high street lenders won’t be available to us.

Credit reporting data also shows people who are associated with us, for example people who live at our address. This information is also very important as if someone at our address has poor credit rating then it can affect our chances of getting credit too. There are ways we can disassociate ourselves from these people however if we go through the correct channels. A credit report company or bank will be able to advise further.

County Court Judgements will also show in credit reporting data. These are a serious obstacle to getting future credit so it is always worth sorting problem debts out before it gets to this stage.

A credit report will show exactly how our credit score is made up and explain how it can be improved. This is critical as it will help you get the credit you would like at a rate you can afford. There are many financial management companies who can give advice on credit reporting data.

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