A credit score is a tool that allows lenders to get an idea of how reliable you are, based on your financial history and spending habits. Data about your financial history is collected and can be analysed in your credit report and this is used to calculate your score (although lenders may use other metrics to create a credit score). Its purpose is to help lenders decide whether you qualify for a loan and if so, what interest rates they will offer you. If you have a low score, you may be rejected for loan and credit card applications, or face higher fees and rates.
There isn’t a single determined answer for what the brackets are between a ‘good’ and a ‘bad’ credit score, as different credit reference agencies, banks and lenders will all score you differently. However, scores will generally range from 300 - 999, and a higher score is always better. Scores of 650 and above will generally be considered good, whereas lower than 580 may be viewed as a poor score. Anything in between is considered fair but could still be improved.
How do you find out your credit score?
Your credit report will contain your credit score. You can receive this report from any of the main credit reference agencies. This can be done online, allowing you to find out what range your credit score falls under and how good or bad it is.It might be a good idea to check your score with all three agencies due to the fact they can differ slightly in the information they hold on you. This way, you can also check all the information they have about you is correct and change any mistakes. Incorrect information could negatively impact your credit score, so even an address written down wrong could hinder your chances of securing a loan.
Why does having a 'good' credit score matter?
Having a good credit score is important as it gives lenders a picture of your financial situation. A good credit score is beneficial when you’re looking to take out a loan or mortgage, or are applying for credit. It shows lenders you are able to repay on time and can mean they will offer better interest rates and fees, as they view you as less of a risk.
If your score is not satisfactory, you may find yourself facing rejected applications and struggling to find a company willing to lend to you. However, your score will change based on your behaviour, so a bad score can be improved with a bit of consistency.
Improving a bad credit score
If you find out your credit score isn’t very good, you may want to work on improving it. Even if you’re not looking for a loan yet, keeping your credit score high can really help in the future - especially if an emergency comes up and you need to borrow money quickly.
Ways you can improve a bad score include setting up standing orders to ensure your bills and other regular outgoings are always paid on time. You can also start paying back any debt you owe, including credit card repayments. Ensure you are on the electoral roll at your most recent address and cancel any unused memberships or accounts. This will build up your reliability, and your credit score will creep up.
At Morses Club, we specialise in small cash loans to help with unexpected expenses. We assess each application in person, based on your individual circumstances. In some cases, we can offer loans to those who have been refused credit from another lender. This isn’t guaranteed but, if you’ve been considering bad credit loans, then we may be able to help.