Credit checks are often associated with financial products, but this isn’t the only instance when they are used. As such, a good credit score is essential for several reasons. The following is an overview of when a credit check will be carried out and why a good score is necessary.
A Good Credit Score Helps People Secure Lower Interest Rates
When carrying out a credit check for loans or credit cards, a person’s credit history will often dictate the interest rate they’re given. Those with good credit scores will often enjoy low-interest rates.
However, those with a low credit score are considered a risk, meaning if credit is given, the interest will be much higher than those with a good credit score.
Credit Scores Are Used by Landlord and Housing Agencies
Although many only think of credit checks when applying for finance and loans, they’re also commonly used when applying for a property lease.
If a person has a poor credit score, then this could affect the likelihood of an offer. In other instances, tenants may be asked to pay a larger deposit or secure a guarantor before a tenancy is offered.
A Credit Check Can Be Part of a Job Application
Companies can carry out several background checks when applying for a job, depending on the role. Although credit checks are used for those working in a financial setting, businesses and organisations can also use them to verify a person’s identity.
Permission will be needed before a company carries out a credit check, but a business must make an assessment to make a job offer.
Can a Credit Score Be Improved?
Given a credit score’s importance, many will be keen to see if they can improve it. Those who need clarification on what information is listed on their file can request a credit report from the following agencies.
Experian
Equifax
TransUnion
As the three agencies are separate entities, you will need a report from each to ascertain what details are held about you when a credit check is carried out.
The first thing you should do is ensure all the details held on the report are correct. Although mistakes are rare, they can happen, and the person has to contact the relevant credit reference agency to ensure that any misinformation is corrected.
If all the details on a credit report are factual, then a change in habit is often needed when improving a credit score. In addition to ensuring all financial commitments are made on time, you should also look to reduce any current debt you may have.
Financial difficulties can also cause a poor credit score due to not having money in place to meet financial commitments. If this is the case, you should seek assistance as soon as possible. Although the steps taken won’t mean an instant improvement to a credit score, reviewing and improving your current status ensures it will improve over time.