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Money. I’ve always been great at spending it, but keeping track of it? Not so much.
I’m a left-brainer, so all those numbers and calculations and lists make my blood run cold. But being a grown-up and a parent with children to support means I simply have to get over my numberophobia (made-up word) and be fiscally responsible. Sigh.
OH and I are in the (laborious) process of applying of a re-mortgage, so we can carry out much-needed renovations on our home. Which has meant A LOT of forms and A LOT of figures and A LOT of examining our finances. Bleurgh.
Thankfully, it’s all nearly sorted now, helped in part by the fact we both had great credit scores. Which surprised me a little bit, since my earnings took a hit when Big Sis was born eight years ago and juggling work with full-time Mummy-hood has meant they’re yet to fully recover.
But here’s the thing – your credit score isn’t worked out by how much you earn, it’s calculated by how well you manage the money you do have, and how responsible you are with your debt.
Lenders want to see proof that if they give you money you’re going to pay it back, on time and in full. So they check to see how good you’ve been paying back previous loans, and whether you’re all up-to-date with your current commitments. And they do this via your credit report – which compiles information from all your credit agreements, past and present (credit cards, loan agreements, hire purchase, store cards).
It makes a note of how much you still owe, and how much unspent credit you have on cards. It also flags up any unpaid or late payments, giving an overview on how careful you are with your money. They then allocate you a score somewhere between a minimum of 0 and a maximum of 999 (the higher the better).
Ironically, it’s better to get into debt and religiously pay it off than never to get into debt at all. That’s because if you’ve never had any credit, potential lenders can’t tell if they can trust you with their money.
So, how do you find out your financial reputation, and improve your credit score?
Remember, as I mentioned earlier, you don’t need to earn loads to have a great credit rating, you just have to prove you can borrow money, and pay it back on time.
One thing I did a few months ago – before we applied for our re-mortgage – was sign up for a free credit report from ClearScore. I’d signed up for other providers in the past, but it had cost a few pounds each month.
ClearScore is the UK’s first free-forever credit score provider – sign up once, and you’ll receive a monthly report detailing your score, whether it went up or down, and why it was affected (if you made any late payments, etc).
It’s a quick, easy way to see at a glance what you’re doing right, and what you can do better.
So I spoke to the team at ClearScore to find out more about how credit scores work, and how you can make them better.
First off, you need to fix any problems that may be dragging down your rating without you even realising.
Make sure you’re financially ‘divorced’ from previous partners, otherwise you could end up being punished for their bad habits long after you’ve moved on.
Previous credit rejections will leave a stain on your report. To get around this, use eligibility checkers before applying. For example, you can use ClearScore to see at a glance to how likely each lender is to grant your credit request. To ensure your rating stays intact simply pick one of the companies offering you a 100 percent guarantee of approval. Simple.
Ensure there are no errors on your form – you can check your report online to make sure everything is correct, including the spelling of your name and full address. Also, make sure you’re registered on the electoral roll, as it will affect your rating if you’re not.
Don’t max out your credit: lenders prefer to see you sitting comfortably within your limits, not pushing up against them.
The better you get your score, the better it is for you in the short and the longer term: you’ll be more quickly and easily accepted for future credit agreements (everything from credit cards, to mortgages), and you’ll probably get offered better interest rates too.
And regularly check your credit score; not only will it help you see what you’re doing right and wrong, it will alert you to any issues, such as identity theft of fraudulent applications under your name.
It’s never too late to get your finances organised, so sign up for your free ClearScore report, and get started now.
• image ‘hand with rows of coins‘ courtesy of Shutterstock
