Rapid credit check. Credit cards.
Understand credit and how it works and, as well as enjoying more financial freedom, you could avoid getting into serious debt in the future.
Credit involves borrowing money with the agreement to pay it back at a future date, for example as you would with a home loan or credit card. Before a lender will lend you money they’ll first look at your credit history, alongside other considerations such as your financial stability and readiness, to determine your ability to pay back the loan.
You may have heard people talk about good credit, bad credit and no credit. Good credit loosely means you pay what you owe on time and lenders feel confident about lending you money. Bad credit loosely means you may not have paid credit bills on time. This makes it harder to qualify for loans or get low interest rates. No credit means you haven’t had credit before, so there’s no record of your ability to repay the money on time.
Having good credit tells lenders that you are more likely to be financially trustworthy.
Here are a few tips how to build “good credit”:
Having a good “credit history” will help, for example if you have or previously have held credit cards, loans or a mortgage and have made regular repayments on time
If you’re planning to borrow, do it responsibly and have a plan for how you’ll repay your borrowings
Make repayments on credit you already have, for example credit cards, loans or a mortgage, on time.
Your credit score is what individual lenders use to decide if they will lend to you, how much they’ll lend and, in some cases, at what interest rate. Different lenders have a different approach to awarding a credit score, but common factors which affect your score include:
Whether you have made or missed payments on credit you have previously held
What other accounts you have, how many you have and how long you’ve had them
Your total debt
Other information from public records.
The better your credit score the better rate you can expect, which means you get a better deal.
Building and maintaining a healthy credit file can play a part in your personal and financial plans. Even if you have a healthy credit report, it is recommended that you check it every year or so to make sure the information it contains is accurate.
Your credit file is your record of creditworthiness – in other words, how good you are at paying back any money you’ve borrowed. Lenders use credit files to evaluate your ability to make monthly payments on time.
Each lender has its own scoring system, but you’ll generally score the most points the longer you’ve been in a job; if you own your own home and/or have lived for a while at the same address; if you’re middle aged rather than younger or older; if you’re married; and if you’ve shown a good ability to make repayments on previous borrowings.
Good credit comes from paying bills and any loan repayments consistently and on time. For credit cards, always pay at least the minimum amount due and avoid late payments.
You can order a copy of your credit report from one of your credit reporting agencies.
You have a right to see the information that is in your credit report and can order a hard copy of your statutory credit report by post or online. If you find some of the information in your credit report isn’t accurate you can ask for it to be corrected.
Your credit report contains a wide range of information including details such as your name, and current and previous addresses. It also includes your history of paying credit and information available to the public such as court judgements against you or whether you’ve been declared bankrupt. It also contains details of enquiries made by lenders or other parties authorised to receive your credit report.
If your credit report includes incorrect information, contact one of the credit reporting companies as soon as possible. They will review your report, investigate your claim, and make any corrections necessary.
The contents of these pages are not intended to be taken as financial advice or recommendation.
