What Your Credit Score Means

11 Mar

Finance can be confusing – fact. Every credit provider has different rules, regulations and limitations that have to be adhered to, which is fine if you have a single line of credit. However, when you have multiple credit cards, loans and overdrafts to negotiate, mistakes can be made that will reflect upon your credit score leading to issues in the future. Many of us don’t realise what damage is caused by late payments, non-payments and even how much credit we have across the board. This is why many of us simply don’t understand what our credit score is until we need to. Sometimes we first realize this when trying to get a mortgage or car loan and the application gets rejected. This is why knowing the credit that you have and the limits of each is imperative.

If you are struggling to get to grips with your credit score, or just even need to know the basics of what is a credit score, keep reading the guide below:

What is a credit score

There first thing to remember is that your credit score is not universal. If you live in the UK then your score will only be reflected on that soil. It goes further than this though, as it also comes down to the individual lenders, equally these are not universal either and each lender will have its own set of limitations. A rejection from one lender will not mean a rejection from all lenders.

Your personal credit score is a built up from many financial transactions you have had throughout your lifetime. This can include all the applications you have made for credit, how much you have been loaned in the past, how you have paid the back and whether you have missed any payments. Be aware that if you are married or cohabiting, this can also reflect your partner’s monetary accounts and history, so you will both need to be clear as to where your credit histories are.

Your credit score is the one thing that will show up any transactions you have made through line of credit, this makes it the single most important document for future credit accounts you may need.

What to do if you have been denied credit

Firstly you have the right to get a credit rating check here at any point. It is your history and it is always advisable to be kept up to date with it at all times. So, you have applied for a loan and have been rejected, what can you do to avoid this in the future? This first thing to do is to look for red flags within your credit scores. These may be quite old issues that you have resolved but that hasn’t been taken off your report. Unpaid bills, missed payments and even applying for too much credit can raise red flags, but they can also be resolved as long as they have been removed.

If there is an issue with a long standing creditor, such as you have paid off your debt but it is still showing on your report, then there are some steps you can take to get it removed. The first and foremost task is to contact the creditors and ask them to remove it for you. In the majority of cases this works perfectly, however if a creditor is willing to help you then you may want to contact the financial ombudsmen for advice.

Once you have removed any threats, then you can rebuild your credit over the next few months. This is a slow process and there is no quick fix, but if done correctly you will find yourself in a much better position to start lending again. The main thing to do is to make sure you pay off your credit on time each month. If you have a credit card for example, then try to make slightly more than the minimum payment each month, rebuilding your credit in the process.

Finally, don’t panic. Every lender will have a different set of risk factors, so you may have been denied credit from one but that may not mean you will from all.

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