Understanding credit scores

Whilst excessive debt and credit is something we should aim to avoid; credit is not inherently a bad thing and it can be beneficial to have credit at times to show that you can be responsible with it.

A credit score is a numerical representation of your history with credit to assess how likely you are to repay potential future borrowed money. Lenders will use your credit score to assess the risk of lending to you; a higher score could get you a better loan term, such as lower interest rates and higher credit limits.

You can improve your credit score by:

Maintaining a permanent address: A stable address history can enhance your score.

Having a positive credit history: Timely repayments on loans and credit cards demonstrate reliability.

Keeping credit cards well-managed: Pay off balances on time and keep your credit utilisation low.

Avoiding missed direct debits: Ensure all payments are made on schedule.

Registering on the electoral roll: This helps confirm your identity and residence.

Keeping fixed-term contracts like mobile phone plans: A good payment history here can positively impact your score.

Paying rent on time: If your landlord participates in the Rental Exchange Scheme, timely rent payments can also contribute to your credit history.