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What is a Credit Score?

After covering the topic of credit cards over on Instagram this week, I thought it would be fitting to have a blog post dedicated to the topic too. This week, I invited Lauren from Pave to write an article to discuss what a credit score is, and how you can go about improving yours!

What is a Credit Score?

A credit score is essentially a numerical value that shows lenders how creditworthy you are. It’s decided by Credit Reference Agencies (CRAs) and your score will change depending on which CRA you use to check it. There are three main CRAs in the UK: Experian (score range from 0-999), Equifax (score range from 0-700) and TransUnion (score range from 0-710).

Your credit score tells lenders how reliable you are when it comes to repaying debt.

People with a higher score are seen as being lower risk, and therefore more likely to be approved for credit, have credit cards with higher limits or better benefits.

Credit Cards

You can improve your credit score by:

1. Paying your bills on time

Paying certain utility bills on or before the deadline improves your score as it shows lenders that you are used to making regular payments.

The easiest way to do this is by setting up a direct debit with your providers so your bill is automatically charged before the deadline.

Or, if you need extra credit – opening an account, meeting payments on time and not borrowing more than you can afford can increase your score.

2. Keeping old bank accounts open and don’t constantly apply for new loans or credit cards

Your credit age makes up 15% of your credit score. The only way to increase your “age” is to keep old accounts open with a good record for a long period of time and avoid opening new ones excessively.

Every time you open a new credit card or take out a new loan, your average age decreases.

So, if you sit tight and keep things in order, your score may increase on its own.

3. Being on the electoral register

This is a publicly available register which credit agencies may refer to to check your address and residence details. Not being on it can impact your credit rating, and it’s easy to do.

For more information, take a look at their blog on the electoral roll and your credit score.

4. Applying for credit builder loans.

Try not to take out more loans where possible, but if you do need to take out a loan, there may be specific credit builder loans with good rates that can help.

Make sure you pay back your minimum repayments as this is what will boost your score and give you access to more products further down the line.

Remember, building your score can take time, so pick your providers carefully and make sure they’re offering a fair rate.

Building credit with Portify Credit Boost

Pave is a credit builder app that helps you build your credit history to improve your credit score. We report each on-time subscription fee payment to Experian, which builds up your credit file. There are many ways to improve your credit score and using Credit Boost is just one of them!

I hope this blog post has been a helpful insight into credit scores and how you can go about improving yours. Want to learn more about Pave? Click here! Feel free to also have a read of our other blogs too!

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The All Things Money Podcast is a personal finance podcast designed to help kickstart your personal finance journey.

Join me for light-hearted and chatty conversations as I cover a wide range of personal finance topics we weren’t taught at school from budgeting, saving, investing and everything in between!