3 Factors That Could Be Affecting Your Credit Score
Many Brits are actually quite unaware of what a credit score really is. In fact, it is commonly questioned whether credit scores and credit reports are the same things. We understand that learning about your finances and credit isn’t something that is often taught growing up, but it’s more of an aspect you are forced to learn alone. So, lacking knowledge in the area is probably more common than you’d think. However, with the information online constantly growing, developing and strengthening your knowledge is easier than ever. To start simply, Experian, Equifax, and TransUnion are the three major credit reference companies in the UK. These companies hold significant amounts of data on us that will undoubtedly influence many of the decisions we decide to make in life. Therefore, it is very important that, as an individual, you keep your credit score on the higher side of the scale.
What Exactly Is A Credit Score?
Your credit score is a three-digit number that rates a consumer’s creditworthiness. The score is calculated based on an analysis of one of your credit reports and is intended to forecast your reliability to a lender. Several parts of your life are influenced by your credit score, including whether you qualify for a payday or short term loan, the interest rate you pay on these, and potentially whether you can rent the property you desire. Therefore, ensuring your score is on the higher end of the scale will make you seem more reliable to a lender, making the borrowing or approval process much easier.
Credit scores and credit reports are usually the subjects of many myths and misunderstandings when looking into payday loans. This is your chance to learn about how your credit score is calculated, which you may not be aware of.
Applying For Credit
In the world of lending, there are two kinds of credit checks conducted in order to aid the lender’s decision. These are known as “soft credit checks” and “hard credit checks.” One thing that many people don’t actually know about loans is that when they apply for credit, a lender will conduct one of these credit checks to ensure their reliability. When someone applies for a payday or short term loan, many lenders will conduct a soft credit check. These are used to assess if you fit the requirements for the loan, as they offer the lender insight into your financial management. A soft credit check is recorded even if it doesn’t leave a noticeable mark on your credit report. Your credit score won’t be affected by a soft credit check. But, you’ll be able to find out whether your credit history has been looked at.
On the other hand, a hard credit check occurs when a lender thoroughly examines your credit report. Any company looking at your report will be able to tell that you have applied for credit because each hard check is logged there. Too many hard credit checks can definitely damage your credit score, making it much harder to get accepted. This is why lenders advise you not to apply to multiple lenders. Instead, if you have doubts regarding acceptance, you could use a broker.
Mobile Phone Contracts
Although mobile phone contracts might appear to be a random expense, they can significantly affect your credit score. Keeping up with your phone contract is a smart, yet simple, strategy to boost your credit score. This is a great way to prove to lenders that you can keep a regular payment schedule. On-time payments will be reflected through increases in your score, as your payment history accounts for 35% of the total.
Having joint accounts and shared credit commitments has many benefits, but there are some disadvantages as well. Having a joint account indicates that your rating will be “co-scored.” If you and your partner have similar credit scores, this won’t be much of an issue. If you both have a positive relationship with your finances and your money management skills are high, it is likely you won’t experience many problems. However, if your partner has worse credit, you’ll soon notice an issue as they’ll be dragging yours down with theirs.