Don’t be beaten by a poor score

Improving your credit rating gets you cheaper deals and saves money

money@mirror.co.uk THE three-digit number that makes up our credit score rules our financial lives. It can mean the difference between bagging the cheapest deals or paying way over the odds in interest.

It’s what lenders use to help them decide whether to accept or decline applications for financial products, including loans, mortgages and credit cards, and a low score could even see you denied a mobile phone contract.

As well as the key to being accepted for these accounts, a good score can be kind to your pocket as it will increase your chances of securing the best deals, those that top the best buy tables, saving you hundreds, even thousands of pounds in interest.

And keeping an eye on your credit report, a history of your financial life and credit score, can help you to spot early signs of fraud.

But, despite its huge importance, almost three-quarters of us don’t know our score. Many of those who have checked their credit report and know their score only did so after they had been declined a financial product.

We need to make checking our credit report part of our everyday finances. Certainly, before applying for any financial products, you should check your credit score and ensure everything recorded in your credit history is correct.

James Jones, head of consumer affairs at credit report firm Experian, says: “People should think of their credit report as their financial CV. You wouldn’t apply for a job and let an employer look at your CV without first checking to make sure it’s up to date and paints the best picture of your suitability for the role – so don’t apply for credit before giving similar attention to your credit report.

“Sometimes there are really easy ways to make it shine.”

Scores range from 0 to 999 and are rated from very poor to excellent. With Experian, for example, a score of 0 to 560 is very poor, 561 to 720 is poor, 721 to 880 is fair, 881 to 960 is good, and 961 to 999 is excellent.

Someone in the poor band will typically pay £381 more on a £6,000 loan over four years, as they will be paying 17% interest, on average. That’s compared to someone in the fair band who will typically be paying 14% in interest.

Research from Experian shows that almost half of those with excellent credit scores get unsecured loans at 5% or less.

It’s not just a matter of knowing your score and getting into the habit of keeping an eye on your credit report. These rates show how important it is to try and improve things if you don’t have a high score.

Simple things can make a big difference. Such as ensuring that you pay your bills on time each month, being on the electoral roll, and keeping an eye on the balances you have outstanding on credit cards.

A bit of time spent on your credit report and score can mean less money spent on financial products. James adds: “It’s worth investing a little time on your credit score because it really is the key to getting the best rates on products like credit cards, mortgages and loans.

“Fortunately, there are several ways you can begin to improve your score, with the first step being to check where

you stand right now.” CHECK Three-quarters of us don’t know our score

WHAT REDUCES YOUR SCORE

It is normal for your credit score to fluctuate, but there are some actions that can have a dramatic negative impact. Here are five examples of how your score is reduced, and how much by:

■ Defaulting on an contractual agreement = -350

■ Receiving a court judgment (eg CCJ) = -250 ■ Missing a regular monthly payment = -130

■ Using more than 90% of a credit card’s limit = -50

■ Having a balance of more than £15,000 on a credit card = -50

FINANCIAL CV

SIX TIPS TO IMPROVE YOUR CREDIT SCORE

James says: “As well as helping confirm your name and address, this contributes up to 50 points to your Experian credit score because it’s seen as a sign of stability and reliability.” James says: “A single late payment can wipe 130 points off your credit score so