What comes to mind when you think of your credit score? If you wince a little bit when people mention this, chances are you are one of the 18 million-plus people who are risking their credit scores with some bad money habits.
While there isn’t one single score in the UK that records your credit score, there are four, but most people are more familiar with the top 3; if one holds damaging information, then the likelihood they all will.
With 72% of 18-24 years old having never checked their credit score and 49% of all adults in the UK have never accessed their reports, it makes for shocking reading especially considering that more people have been plunged further into debt and have missed one or more payments since the onset of the coronavirus pandemic.
But your credit score is much more important than getting you accepted for credit cards or loans. A credit score will build a picture of who you are and how well you manage your finances.
Poor finances and a bad credit score can impact many different areas of your life, including the ability to move from a prepayment meter to be able to pay via direct debit, accessing lower rates, and even some job roles require you to have a good credit score.
The fact is that there are many ways your credit score can hold you back, and any damage you do to it can, in some cases, be irreversible, especially if you are unable to follow your chosen career path due to a poor credit score.
What Is Classed As A Good Credit Score?
Depending on the credit agency you are examining your credit score with, the number can vary as to what determines a good score. And there are brackets to allow you to see where you are and your potential ability to gain credit. These are;
- Experian – 721 and over
- Equifax – 380 and above
- Transunion – 566 and above
The higher this number, the better your score. You can be rated as excellent and have a score at the top of the rankings. However, minor fluctuations are not to be worried about as this can be determined by late reporting or changes such as taking on new credit.
It is essential to know that abstaining from credit can be as bad as having too much credit and being a poor payer. This is because you have no history for people to assess your suitability and look at the type of lender you will be.
If you want to improve your credit score, then knowing what you are working towards and the benefits this will afford you can help you to stay on track and avoid the type of financial decisions that affected your credit in the first place.
Lower Interest Rates
The better you credit, the more you will be rewarded with reasonable rates of interest. A higher score means you are a more suitable lender and have a good chance of making all your repayments on time. A poor credit score and haphazard payment history can indicate in the future, you are a risk and are more likely to exhibit the same patterns.
The difference in the interest you will pay on any borrowing can be the difference between affordable payments and potentially hundreds of pounds.
A bonus of having a good credit score is that it opens up a more extensive selection of lenders willing to fulfil your credit requirements.
While there are still lenders willing to loan money to those with poor credit scores and a history of missed repayments, typically, these charge exorbitant interest rates and effectively trap pope into a cycle of debt, requiring them to constantly lend more money even to be able to afford the repayments, for this reason, or if you have been affected by this, there are Morses Club refund claims being processed to help you to be compensated for the position they put you in.
But, if you maintain a good credit score, you will no longer have to worry about having limited lenders to borrow from and can access better lenders to meet your needs.
Lower Car Insurance
If you choose to pay your car insurance monthly, chances are you will have noticed that you may be charged an APR. This is normal for many lenders; however, have you ever seen that your options arel limited or rates increased? Your credit score can sway the car insurance quotes you receive.
Car insurance comprises many different factors, but if you require a monthly instalment option, having good credit will afford you more insurers to choose from and lower premiums as statistically, those with lower credit scores make more insurance claims.
Mobile Phone Contracts
These days you need to update your phone every few years to keep up with the latest technology. And as many manufacturers limit the upgrades on older models as they become obsolete, you will need to upgrade even if you don’t want to. If you want a newer model phone and have to buy one outright, the cost can run into the hundreds of pounds or even break the £1,000 barrier depending on the model.
As mobile phones can be expensive, lenders are strict with who they grant contracts. If you have bad credit, you might not qualify for a top of the range model and be restricted to an older model if you get accepted at all. Or you may have to pay more money upfront as a downpayment or be tied into a not so favourable contract.
You Can Rent Homes Easier
Landlords and letting agents run credit checks when you apply to rent a property. This is first to make sure you are who you say you are and to look for past behaviours.
With rent prices increasing and many landlords relying on the rental income from properties to pay their mortgages and/or letting companies, they want to make sure the tenant they choose can and will pay on time every single month.
A poor credit score can lead to a refusal to rent the property even with glowing references from previous landlords or require a guarantor who will pay if you don’t.
When lenders choose to accept your application, they are essentially making money from you. If you have a good credit score, they will be confident you will pay back what you owe and the applicable interest. This gives you more leverage to negotiate on loan terms, amounts and perks if you are able to, for example, when buying a car.
Unlike when you have bad credit, you will have more lenders and options to choose from, so instead of you trying to convince them to lend you the money, they will be vying for your custom. Use this to your advantage!
Better Career Prospects
Not everyone knows what they want to do with their lives right out of school or university. Or it may take you a while to climb the ranks within a company you have been working at for a long time.
Simply put, a good credit score can open up many more job opportunities for you as for a wide range of careers, you need to have a good credit score to be accepted for the job role or even training. The jobs can include;
- Credit brokers
- Prison guards
- Law enforcement
- Border control
- Lawyers and many more.
So if you have dreams of a career now or years down the one, protecting your credit score can make sure this dream job is still within your reach.
Peace of Mind
A poor credit score will typically show a flurry of missed payments and failed credit agreements scattered over many years. It is the culmination of many different actions you choose to take or not to take, as the case may be; with poor credit and kissed payments comes the threat of debt collectors, County Court Judgements and even bankruptcy. It isn’t a life that many people find enjoyable, nor is struggling to make repayments.
For many, a change in circumstances can trigger this path through no fault of their own. For others, this is something they have put upon themselves. But maintaining a good credit score can give you peace of mind, lower stress levels and a better night’s sleep as you are not worrying about people chasing you for money.
In conclusion, while you may find that from time to time, your circumstances change, and you are struggling with money, being able to ensure you keep your credit score intact can have many benefits in all areas of your life. If you are experiencing difficulties paying the money you owe, you should always contact your lenders to discuss this and see how they can assist you in repaying what you owe. While this will impact your credit score, working with them and paying a mutually agreed sum can benefit—statistically, your credit score and your credit future.