At some point in our lives, we may need additional cash to give us a boost towards our goals, whether that’s in the form of a mortgage, or to buy a car. Sometimes, we may need to take out a loan to help us deal with an unprecedented expense when our cash flow won’t stretch that far. This is where a payday loan direct lender can help when you need it most. To be approved for finance, you’ll need a good credit score to show you’re a creditworthy borrower – but what is a credit score and what does it mean for you? Read on to find out more.
What is a credit score?
Your credit score is a number that ranges from 0-999. It’s a figure that shows lenders at a glance whether you’re a trustworthy borrower if you apply for finance in the future. This can be anything from short-term loans to car finance, and mortgages. Generally, the higher the credit score, the more likely you are to be approved for a loan. A good credit score tends to be 880 and 960, and an average score would be around 720-880. You should make sure you check your credit score regularly and strive to keep it healthy so that your finances can benefit. As well as your score being an indicator of how trustworthy you are as a borrower, those with higher credit scores are more likely to be awarded lower interest rates, as lenders feel more assured that they will get their money back.
How to improve it
You can check your credit score easily with the help of one of the many credit bureaus and websites you will be able to find online. You’ll not only be able to view your exact credit score as it stands but your credit history too, so you can get an overview of how you’ve managed your finances in the past.
If you check your credit score and find that a few years of struggling to pay your bills and manage debt has caused it to deplete, don’t panic. There are ways that you can improve your credit score to stand you in better stead with lenders in the future. Here’s how…
- Build up history: If you don’t have a credit history, you won’t have a credit score! Because of this, you’ll likely be awarded a lower score. Building up a credit score is simple – you could apply for a credit card and make small purchases that you know you can afford to pay off monthly, as a way of building good credit.
- Pay your bills on time: One of the main reasons people have poor credit scores is that they don’t pay their bills when they should. Make sure that you automate your finances to pay any outstanding bills each month, this way, you won’t forget and end up defaulting.
- Check for mistakes: Sometimes, a low credit score can be caused by something as small as a misspelt name. Check your credit report to ensure everything is as it should be and report any mistakes to your chosen credit score provider.
- Don’t apply for finance regularly: When you apply for finance, this has an impact on your credit score. Lenders will be able to see that you’ve been applying for finance with a range of lenders, which makes them think you are desperate for cash, and therefore a risk. Do your research when applying for a loan, but make sure you’re not applying for several at once.
What a good credit score means for you
A good credit score is important, especially as you reach various milestones in life, like buying a house or a car. You can take advantage of a good credit score in general, by being approved for additional finance when you need it most. If you’re looking for finance to start a business, to make home renovations, or for cash to help you deal with an emergency, having a great credit score puts you in the best position to be approved. It can help you to get the best interest rates, and generally make it easier for you to borrow money. Working on your credit score is essential, so you can benefit throughout your life.