How is my credit score calculated?

Understanding the impact of your credit score on purchasing a property is important, but equally as important is understanding what constitutes to a good credit score.

Credit scores can range from 300 to 850 and are derived from the data in your individual credit report. Typically, three key factors influence a good credit score, all of which relate to your past financial management:

• Your payment history
• The amount of debt you have
• The length of your credit history

Each credit referencing company will likely use a different numerical scale, but generally, the following ranges indicate the quality of your credit rating:

• 300-579: Poor
• 580-669: Fair
• 670-739: Good
• 740-799: Very good
• 800+: Excellent

Why is my credit score important?

Your credit score is crucial when applying for credit, loans, or mortgages, as it indicates to lenders how reliable you are and your likelihood of repaying the borrowed money.

For example, a good credit score gives potential lenders confidence in your ability to repay, making them more likely to approve your credit request. In contrast, a low credit score may cause lenders to be more cautious, potentially leading to a declined application. Although obtaining a mortgage with a low credit score is possible, it’s advisable to find ways to improve your credit score whenever possible.

What can impact my credit score?

Maintaining financial responsibility is important if you aim to achieve a good credit score and secure loans or mortgages in the future. Remember, building your credit score takes time, and it doesn’t update daily. So, starting as early as possible, the better.

Here are some strategies to improve your credit score:

• Pay your bills on time: Late or missed payments can negatively impact your credit score.
• Pay your debts: Try to pay off debts as quickly as possible.
• Keep your credit balance low: Staying close to your credit card limit can harm your credit score.
• Check your credit report regularly: Ensure your personal information is accurate. Different credit reference agencies have varying criteria and timeframes for accessing reports.

How do I check my credit score?

Checking your credit score is typically free and takes only a few minutes. Credit reference agencies such as Experian, Equifax, and Callcredit can provide a basic credit check. Additionally, your bank may offer access to your credit score. Keep in mind that some services, like credit score monitoring, might come with a fee.

How often should I check my score?

It’s advisable to check your credit score at least once a year, and always before applying for a mortgage or any form of credit. Performing a self-check is known as a ‘soft search,’ which does not appear to lenders and does not impact your overall rating.

Searching for expert mortgage advice?

Contact us if you have any questions about how your credit score affects your mortgage. If you have significantly improved your credit score and are looking to remortgage, we can help you find a deal that better fits your situation.

If you’re a first-time homebuyer, make sure to maintain a good credit score and reach out to us when you’re ready to start your journey into homeownership.