The Average Credit Score
A Credit Score is a number between 0 – 1200, that a credit agency calculates on our behalf and provides to potential lenders. The idea is to display numerically our propensity to repay a loan, so the higher your score, the better your creditworthiness.
Therefore your ability to access credit depends on how you conduct your overall financial affairs. Un- fortunately, the exact methodology a credit agency uses to determine someone’s score is cloaked in secrecy. However, there are some general tips and tricks you can do to keep your score right up at the high end.
As you may be aware, the credit ‘score’ has been around for a very long time, but these days absolutely everything you do of a financial nature is counted. For example, late payment of mortgage or credit cards would always affect your score, but now, the late payment of bills such as phone, gas or electricity deducts points.
Even just shopping around for different credit card deals can adversely affect the average credit score and that’s without actually going through with an offer.
All your finance-related applications are recorded and then used to determine your current financial situation, rightly or wrongly. So the trick is to continue shopping around, but don’t make an application.
And remember, any creditor can access your score and not just the obvious ones like banks. Even mobile phone retailers, just before you’re about to purchase that new Samsung Note 8!
Tips to improve your credit score
Fortunately, five years is the maximum anything is kept on your record, so time will heal a below average credit score. But in the meantime, the following can also help
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Lower your credit card limits
Yes I know, lessen your credit to gain credit? But even if you are not using any of the credit limits, it is still counted by a lender as available credit, fully drawn. Why, because you can fully draw it at any time.
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Consolidate your personal loans and/or credit cards
The less lending ‘footprint’ the better. And when you do, destroy some of the credit cards so you won’t ever use them again!
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Limit the number of credit inquiries
Sometimes consumer credit advertisements ask you to complete a ‘quick’ application to check your eligibility. No obligation. Well, don’t as this innocuous application is recorded. If you do a few of these over a month, your score reflects a ‘desperate’ credit seeker. Not good.
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Always pay your rent and bills right on time
Remember to allow a few days for bank transfer time.
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Always pay your mortgage and personal loans on time
Set up a direct bank debit and always ensure you have the money in your account when it’s due.
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If you can, pay your credit card off in full each month.
This is easier said than done, I know, but try. Your credit score will love you if you can!
Access to your Credit Score
You are always entitled to access your credit score and see how it was calculated. In fact, there are actually some lenders who will discount interest rates on loans if you have a high score. So it is handy to know what yours is.
Additionally, anything that appears on your record and is incorrect can be removed and your score adjusted. So it is important to continually check your credit score to make sure the credit agency hasn’t made a mistake on it. Mmmm, hard to believe a computer making a mistake – not!
I have also come across ads claiming to be able to ‘repair a credit score. How this is done I have no idea but I would treat these claims with some caution. Stick to the basics and you will be fine.
