A recent survey by a leading credit referencing and scoring company has shown major discrepancies between residents of various countries when it comes to their credit scores. Your credit score is expressed as a numerical value, and is a measure of how good a risk you are for a financial services company. Put simply, it gives you a general idea about whether or not you’d be likely to be accepted for a loan or mortgage. The cost-of-living crisis means that more of us than ever are thinking about borrowing to meet rising costs, and understanding your credit score helps you judge whether your application is likely to be successful. Furthermore, many employers ask workers to have a credit check to verify their identity and help them in their recruitment process. If you’re a bit in the dark about what your credit score is, and how to improve it, then here are the basics.
Know Your Numbers
The main finding from the recent survey was that almost 50% of British adults do not know what their credit score is, and what steps they should take to improve it. In contrast, figures are much higher in other European countries, with only 40% of Germans saying that they don’t think about their credit scores. The survey also indicated that this lack of knowledge could be making it harder for people to get credit when they wish to access a new mortgage or loan. Around 10% of people surveyed say that they have been refused credit since the beginning of 2020, and the majority of those lack awareness of how to improve matters.
Consequence of Poor Credit Scores
Many consumers first try to access loans or other forms of credit through banks and building societies. If refused because of a poor credit score or other issues with their credit history, they are more likely to resort to much more expensive options, such as pay day loans or loans secured against a vehicle. These forms of credit come with much higher interest rates, making the applicant’s financial situation even worse, and creating an ever-increasing spiral of debt. Many more applicants were shocked to be turned down when applying for a credit card or other product, as they thought the had a good credit rating.
Checking Your Rating
British attitudes contrast sharply to those in the US, where the average American looks at their credit score about four times a year, and only a fifth of US adults don’t know what their credit scores are. The easiest way of becoming informed about your credit score is by downloading one of the apps such as Credit Karma, or by signing up for one of the websites such as Clear Score or Experian. Most offer a free membership level if you don’t wish to pay for additional services. Get into the habit of logging into the site or opening the app once a month to check how your credit score is looking. Any sudden changes in rating should be investigated, as it could indicate fraud or identity theft.