What is your credit score?
In the simplest terms, your credit score shows how reliable you are with borrowing money. A credit score or credit rating is a three-digit number between 0 and 999 that reflects how reliable you are at repaying money, based on how you’ve handled money in the past. This is a great, standardised way for banks and companies who might loan you money, to see how well you will pay them back. The higher your credit score, the better your chances of being accepted for things like credit cards, mortgages, loans or even a mobile phone contract.
It's important to maintain as good a credit score as possible to be approved for things like credit cards.
In order to maintain a good credit score you can think about how you use money and your approach to paying your every day bills. It is possible that your credit score could be negatively impacted by a number of factors, like making a late payment or the amount of debt you're in. Other things that will be considered in order to determine your credit score is how long you've been using credit or the types of credit you have used.
As part of our Words that Count series, we've worked with your new money bestie Laura Ann Moore to learn how having a good credit score works and how your credit score will help companies who might lend you money decide if and how much money to lend you.
Take a look at the video below, read our useful glossary of financial terms and then take our quiz to test your knowledge.
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Building your credit score
It is important to build your credit score to make sure you have the best score you can when you are ready to borrow money or use a credit card. This will help banks and money lenders to see that you are a reliable person to lend money to. Don't worry, it's not as complicated as you might think! There are some really simple ways to improve your credit score. Start by making sure your address details are up-to-date on your bank statements and checking your credit report for mistakes. In order to build your credit score, try to avoid taking out a joint account with people who have a bad credit rating, make sure you are paying your bills on time. You can also provide evidence of your rent payments to demonstrate your reliability.
How do I check my credit score?
Our Words that Count partners, Experian are the UK's leaders in credit score checks. By registering for a free Experian account, you will be able to learn more about your credit score based on how often you apply for credit, how much you owe, and whether you make payments on time. You'll also get to browse deals from the UK's leading lenders, find out how likely you are to be accepted for things like credit cards and personal loans, and you'll be able to get a new free score every 30 days.
You can also visit Experian's website for more information to help you understand credit scores.