What is considered a good credit score?
At what age do you realise the significance of having a good credit score is it in your 20’s, 30’s or not until your 40’s and 50’s. Late payments, credit card debt, not on the electoral role, court judgments are just a few factors that will contribute to your credit score. It might not feel relevant in your 20’s or until you decided you would like to apply for a credit card or its time to get on the property ladder. Below are some useful links to check your current credit rating, each company have their own methods of issuing a credit score the correction of a simple spelling error on your address could improve your overall score so if you have never checked it give it a go.
Generally mortgage lenders require you to have at least a Good or Excellent credit score for a mortgage loan as per example below via Experian. However it is at the lenders discretion to make the final decision, if you paid a bill late you may still be eligible for a fair interest rate so it really does pay to have a good credit score in the long run. If you do have bad credit there are options available, it could take up to 7 years for it to clear dependent on individual circumstances you would not be offered the best rate options as you will be considered too high risk. Bankruptcy can remain on your file for 10 years, and it is difficult to obtain a good credit rating during that time. Ultimately, it is important to pay your bills on time and use credit wisely to achieve a good credit score.
Length of Credit History
The longer you have been using credit responsibly the higher your credit score will be. This means that people who do not borrow money or take out loans will not have a good credit rating because they have no record of responsible borrowing.
New Credit/Inquiries
Every time you open a new account it hurts your credit score because it shows up as an inquiry (when the company checks your credit to make sure you are worthy of borrowing money) and because it lowers the average age of your accounts (which effects your length of credit history).
So avoid applying for unnecessary credit cards if you want to improve your credit rating.
Types of Credit
Lenders prefer to see a variety of different types of loans, including secured loans (mortgages, car loans or anything with an asset the bank can take if you can’t pay) and unsecured loans (credit cards).
Financial illiteracy is plaguing young adults
It is our duty to educate the younger generation starting as early as you can. Financial education is not taught in schools, teaching the younger generation to learn to save and be financially savvy can have a huge impact on them long term.
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