A credit score is essentially your financial profile. Your credit score is developed, often without your knowledge, and is reviewed and updated every time you apply for a mortgage, pay back student finance or even take out a new phone contract. This all happens without you even lifting a finger.

Your credit report is important to tidy up because it’s what lenders like us use to assess your money management and your eligibility for loans of all kinds. It gives lenders an indication of how consistent you may be with future payments and assesses the risks that you pose.

In a nutshell, the higher your credit score, the better. A high credit score gives you a more generous access to the best loan and mortgage interests, credit card increases and much more.

Many things can affect your credit score, both positively and negatively.  A full credit report is made up of 3 different types of financial data:

• Public Record Data (including any previous debt orders and County Court Judgements)
• Industry Data (which includes anything from mobile phone payments and gym memberships to an overdraft with your bank)
• Derived Data (this includes the addresses linked to you and those that you’re ‘financially associated with’, as well as any previous searches you may have undertaken for credit).

All of this data is accumulated to produce a full financial report and with it comes a top line number to represent it: this is your credit score. This score will change over time, as does the data and information within your full financial report.

There isn’t a single scoring system - different credit agencies will have different minimum and maximum scores. Different lenders will also use different credit reference agencies to assess affordability. As a result, a ‘good credit rating’ can vary based on the agency running the checks.

Whilst this does seem a little confusing, the scores do tend to sit within the same brackets, with 0 being very poor and 700 usually being the highest. Each score will also come with an indication from that credit agency as to whether it is good, fair or poor.

Before you take the first steps towards applying for credit, run your profile through a few different credit agencies and this will give you a better picture of your overall rating.

Improving your credit rating can be quite a lengthy process, especially if you haven’t taken care of your rating in the past. Building a bad credit score into a good one will take some time, so the sooner you start making improvements the better.

Here are some quick and simple steps you can take which will get you well on your way to financial freedom.

1. Check for discrepancies

It’s extremely common to find simple spelling errors in your personal data, such as addresses or marital statuses, that don’t match up within a report. These can cost up to 130 points and 

can’t be found in the credit score alone. So it’s a good idea to access your full financial statement online and amend any errors. 

2. Register to vote

Having your name on the electoral roll can have great perks when it comes to your financial profile. Being registered to vote is considered a sign of stability and makes it easier for lenders to match up your data and check that you are who you say you are.

3. Avoid a lot of hard searches

Try to avoid making several full applications within a short period of time. These are known as hard searches and show up on your credit history with black marks if you’re repeatedly rejected. 

We recommend you undertake ‘soft searches’ with your desired lender before making the full application. This usually gives you an indication of whether you’ll be accepted without affecting your credit score. 

4. Monitor your bank balance

Credit reports pull in data from the past 6 years, so whilst you may think previous debt is over and done with, it will show up on your report. Keep up with all your regular repayments and try and pay off as much as you can to show future lenders it’s been settled. 

If you’re still concerned about past debt scuffing your chances, you’re often able to include a short explanation within your report that the lender may take into account when calculating your eligibility.

5. Don’t max out credit cards. 

When a credit card is maxed out or if you sit dangerously close to your limit, it’s likely that your credit score will be penalised. Credit and debit cards make up a considerable percentage of your final score and act as an indicator for unhandled debt.