Why is your credit score so important?

Why is your credit score so important?

Have you experienced credit problems in the past? Or never had credit before but think you may be looking to get credit in the future and want to know why your credit score is so important? As Bad Credit Car Finance specialists we have compiled some information and helpful advice below.

What is a credit score?

First of all, lets understand what a credit score is, this is a score given by credit reference agencies such as Experian and Equifax. It weighs up all relevant information on your history and current situation with borrowing money.

Remember that different credit reference agencies have different ways of scoring. Please refer to our ‘What is a good credit score?’ blog post for information on the different scoring systems.

How is a credit score used?

Your credit rating is used to help lenders decide whether to lend you money, how much to let you borrow and, in some cases, how much interest to charge you.

Your credit score is part of your financial passport which shows potential banks and lenders who you are and how likely you are to manage their money if they lend to you. A bad credit score can make you a risky borrower while a strong credit score is reassuring to lenders and can ensure you get the best deals out there, which saves you time and money.

If you are applying for a loan, a mortgage or a credit card then your credit score will play a major role. The lender will also look at other crucial information such as your salary, which dictates whether borrowing is affordable for you. This plays a huge part in the lending decision – and this is information credit reference agencies don’t have.

Taking good care of your credit profile starts with making sensible credit choices and developing healthy credit behaviours: pay your bills on time, don’t max out your credit cards and don’t apply for multiple loans and credit cards at the same time.

You may think that at the moment your credit score does not affect your life as you are not looking to borrow money now or in the near future. Just remember that you do not know what is round the corner and it does affect other factors rather than just loans and mortgages.

Can you be denied a job because of bad credit?

Your credit score could affect your chances of getting a job. Employers will sometimes run a credit check on a potential employee before hiring them. It could be because of the industry you work in or the type of data you will be working with. Employers do have to ask permission before they can carry out these checks on you.

Can being self-employed affect your credit score?

Ever thought of starting your own business or becoming self-employed? Starting a new business often requires large loans to cover the start-up costs but if your credit report shows you’re not good with your finances then it’s unlikely a bank will consider lending you what you need. For more information about getting car finance if you are self-employed check out our resources section on our website.

Can a bad credit score stop you getting a mobile phone?

We rely on our mobile phones for everything these days but getting the phone you want on contract is dependent on your credit profile. Because when you walk out of the phone shop with a new phone, the company is expecting you to pay them back over the next 18 or 24 month, just like a loan.

Check your credit profile for identity theft protection

A good reason to regularly check your credit profile is to identity theft. Millions of people fall victims to identity fraud and by the time they find out it is usually too late. So, by regularly checking your reports you will be able to identify any suspicious activity and deal with it immediately.