People with a good credit record will find it easier to secure approval for a range of financial products, including loans with lower interest rates. But what exactly is a good credit record and is there anything borrowers can do to enhance their credit score?
What is a credit record?
An individual with a good credit record has demonstrated that they are able to make repayments on their loans and credit cards without missing payments or defaulting.
There are a number of credit rating agencies out there, most of which use slightly different scales to measure a person’s credit rating. Generally, however, credit scores will fit into one of five categories: poor, below average, fair, good, or excellent.
In the UK, Experian is one of the leading credit score tools. The Experian website itself states that there is no single perfect credit score because lenders often have their own unique set of parameters that they work within. However, typically, a ‘good’ credit score on the Experian model sits between 881 and 960 points out of a possible 999 points.
What does a good credit record look like?
There are numerous factors that can contribute to a good credit record, including evidence that the borrower has never defaulted and consistently makes their required repayments. It is also beneficial for borrowers to use a small percentage of the available credit, which demonstrates a level of responsibility when it comes to their borrowing habits.
Other factors that can positively impact credit records include only taking out loans that match the needs of the borrower and ensuring that all their financial commitments are within their means.
What are the benefits of maintaining a good credit record?
The ability to demonstrate a solid credit rating can have an array of benefits in a vast range of situations. Firstly, a good credit record can significantly improve a person’s lifestyle simply by ensuring that nothing is off-limits because lenders will view you as a lower risk. This can be particularly helpful when buying or investing in a property with a loan agreement, which is something that an experienced legal team such as Parachute Law, can help you with.
Imagine you are applying for a car loan. You approach your bank, they look at your credit record and determine that it sits within the ‘good’ category. Your bank is, therefore, more likely to approve your application, leaving you free to purchase your ideal vehicle.
A good credit score will also ensure that you can access loans and credit cards with lower rates of interest, which can significantly minimise your outgoings each month.
How can I boost my credit score?
If your credit rating isn’t where you want it to be, there are numerous things you can do to change it, which will improve your chances of easily being able to secure a loan or credit card.
If you aren’t already on the electoral roll, now is the time to put yourself on it because it will allow companies to verify your identity more efficiently. It is also beneficial to close any accounts that you aren’t using, as this will ensure that lenders don’t think that your available credit is already too high, which may lead to them denying your application.
