Whether you like it or not, everyone has a credit score. Although the phrase ‘credit score’ might fill you with dread, they aren’t as scary as some people make out.

If you’re wondering what a credit score is, whether you’ve got one and how yours might be impacting your life, you’ve come to the right place.

We break down all the information you need to know below.

What are credit scores?

A credit score is a three-digit number that indicates how likely a lender is to let you borrow money from them. Normally between 300-800, credit scores are calculated by looking at how much you’ve borrowed, how much you owe, and how reliable you are when it comes to your finances (i.e., whether you miss payments).

The higher your credit score, the more likely you’ll be approved for loans, credit cards, or even phone contracts.

What affects your credit score?

If you’re generally pretty good at managing your finances, then you’ll probably have a good credit score.

Some factors that can bring down your credit score include:

• Frequently setting up new accounts
• Maxing out your overdraft and/or credit card
• Applying for credit too frequently
• Borrowing more than you can afford
• Having no credit history

Why is a good credit score so important?

Even though it’s easy to overlook a credit score, a bad credit score can have a huge impact on your financial health. For example, a poor (or non-existent!) credit score can stop you from getting a mortgage or mobile phone contract.

How to improve your credit score

Luckily, it’s not all doom and gloom if your credit score isn’t looking so rosy. You can improve your credit score by:

• Paying your bills on time – Although this might be easier said than done with 8 million people struggling to keep up with high living costs, there are a few things you can do. Firstly, set up direct debits each month to reduce the chances of a payment slipping through the net.
• Don’t apply for credit too often – If you’ve been turned down for credit, it’s tempting to try again. But you shouldn’t. If you unsuccessfully apply for credit multiple times, this can cause your credit score to suffer.
• Update your address – An easy way to improve your credit score is to update your address and register to vote.
• Take out a credit-building card – These are designed to benefit people that have a low credit score. They can be a great way to build up your credit score if you can afford the monthly payments.

Final thoughts…

While building up your credit score might seem daunting, there are plenty of ways for you to get ahead. Even simple things like updating your address and automating bills can help you build a credit score to be proud of.

If you haven’t already, why not start today?