Reasons why your credit score matters
When it comes to the question of whether your credit report matters, it’s safe to say that it does. More people now rely on credit for making purchases and many financial decisions now rely on whether you have a good credit score or not.
There are several reasons why your credit score is so important, and it’s not just so that you’re more attractive to mortgage lenders or that you’ll be more eligible to be accepted for car loans; there are so many important reasons why you should build a credit rating and maintain a good credit history.
In this guide, you’ll find some of the most commons reasons for keeping a good credit score, plus tips on how to demonstrate your financial responsibility to your employers, landlords and mortgage lenders.
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Does your credit score matter in the UK?
In summation, your credit score does indeed matter. While you might not necessarily need an excellent credit score for everyday life, there are so many reasons why you need a good rating, and you probably haven’t even considered some of them before.
Reasons why you should maintain a high credit rating
Below, you can find some of the most common reasons why your credit score is so important.
Your credit score can affect your mortgage eligibility
When it comes to seeing how eligible you are to make your mortgage payments, almost every mortgage lender will check to see how good your credit score is.
They will also use it to determine what they should set the interest rates at which you will have to pay alongside your mortgage repayments. Therefore, it’s incredibly important to maintain a good credit score if you’re thinking about applying for a mortgage, so that you don’t risk your application being rejected.
Learn more: What credit score do you need for a mortgage?
It can also affect your living expenses
If you’re able to obtain a mortgage from a lender and you eventually move into your house, your credit score doesn’t stop being important, even then.
The cost of living expenses such as utility bills are also established by companies looking at your credit rating, so you need to ensure that your credit score is in a good place so that utility services such as water, gas and electric companies can see that you have good credit.
It can affect your chances of employment
You might be surprised to hear that some companies conduct credit checks (although they don’t necessarily always check your credit score) as part of the hiring process.
Some employers may also look into your credit report before offering you a promotion or pay rise, especially if the position offered is a more executive role, or a role that’s related to financial services.
If you want to start your own business, you may need to have a good credit score
If you’re thinking of starting your own business, you may need to think about applying for business loans in order to help fund your start-up, which means your credit history and credit score will be checked by the lender, so you really need to have a good score in order to increase your chances of being accepted.
While your credit score isn’t the only thing that business loan lenders will look into, it is perhaps one of the most important elements, so maintaining a good credit score for this reason is certainly a good idea.
Applying for a car loan can be affected if you don’t have a good credit score
If you’re thinking about getting a new car, but you don’t have the financial means to purchase it outright yourself, then you may look into obtaining an auto loan.
Just like with any other line of credit, the car loan company will likely check your credit history to see if they think you’ll be eligible to pay back the loan.
Your credit score will not only influence whether you’ll actually be eligible for a car loan or not, but it will also likely affect the amount of money you can borrow, as well as the interest rate that you’ll pay on top. Therefore, before applying for a car loan, it’s a good idea to ensure that your credit score is good.
Overall, your credit score affects and influences many aspects of your life. Whether it’s mortgage lenders checking your score to see whether they want to offer you a mortgage, or potential employers who want to see your credit status, your credit score is important in many areas of your life.
Not only does it show if you have a good history of repaying debts, it also proves to lenders that you’re financially responsible and that you’re a suitable person to lend money to. It’s important to remember that anytime you want to borrow money, open a line of credit or set up a new business, your credit score and history will be taken into account.
You might like: Creditworthiness - What do lenders look at?
What is a healthy credit score?
What is deemed to be a “healthy” credit score in the UK differs between lenders and also the credit reference agency that is used to check your credit history.
For example, a “good” credit score with the credit reference agency Experian, would be anywhere between 881-960 and 961-999 for an excellent score.
Equifax has their credit score scale ranging from 0-700, so a good credit score with them is usually between 420-465, with an excellent score between 466-700.
The TransUnion credit score scale is between 0-710, and a good credit score with them would usually be between 658-710.
Therefore, it really depends on which credit reference agency is used to check your credit history and measure your credit score. Providing that you endeavour to keep your credit score as high as possible across all agencies, and you avoid obtaining a low credit rating where possible, you shouldn’t have any problems with your credit score affecting your ability to apply for credit or for everyday things such as utility bills, credit cards or car loans.
You can get a multi-agency credit report and score from Checkmyfile who uses data from all main UK credit reference agencies. Sign up for a free 30-day free trial now (cancelling is easy if you don't want to pay £14.99 per month when the trial ends):
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