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Credit score

When borrowing money, it’s important to pay attention to your credit score, especially when it comes to making large purchases such as your mortgage.

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Credit Scoring is basically a way of predicting future behaviour. If you have a poor credit score, companies may be less likely to offer you a high loan as there is more risk that you will be unable to pay it back.

There are a number of websites online that allow you the chance to check your credit score without affecting it. Don’t worry if your credit score isn’t great – it may be that you have simply not borrowed enough in the past to ‘prove’ that you can make repayments when necessary.

In general, credit history is built up slowly over time as you increase the number of on-time payments you make, as well as a number of alternative actions you can take to help contribute towards this:

Register on the electoral roll: if your name’s not on there, you’ll find it much harder to get credit.

Pay your bills on time: a great way to prove to lenders that you’re capable of managing finances effectively.

Reduce high levels of existing debt: ideally you should eliminate any outstanding debt before applying for new credit. This is because banks, building societies and credit card companies might be hesitant about lending you more if you already have a lot of existing debt.

Limit moving home a lot: Lenders feel more comfortable if they see evidence that you have lived at one address for a considerable period. Be sure to bear this in mind.

Keep your credit utilisation low: Your credit utilisation is how much of your available credit limit you use. For example, if you have a credit limit of £2,000 and you’ve used £1,000 of that, your credit utilisation is 50%, so you’re using half of your credit limit. Normally, using less of your available credit will be seen positively by lenders, and will increase your credit score as a result.