You might not even know that you have a credit score, but if you've ever applied for a mortgage, a car loan, or even had gas or electricity connected to your home, your credit score has probably been checked.
A credit score is a lender's way of figuring out how likely it is that you will either pay your bills on time or not pay them at all. It is a mathematical formula that compares how you pay your bills to how millions of other people pay their bills.
It will look at your debts, your credit history, how long you've had credit, new loans, and anything else it thinks is important. The number that comes out tells lenders whether you have a good credit score or a bad one. If yours is good, you may be able to buy certain things, like cars, or get good interest rates on loans.
If, on the other hand, you have a low credit score, it will be harder for you to get some offers, and the interest rates you pay will probably be higher. Basically, a mortgage lender is more likely to want to do business with you if your credit score is high.
About 35% of your credit score is based on how well you pay your bills. Things like late payments, bankruptcy, and late collections can all lower your credit score. It is usually checked every two years, and the most important things are the most recent debts.
Mortgage lenders also look at how much money you make now and how much you could make in the future.
Someone with a low credit score may not be able to get a mortgage because of how it is calculated, or they may have to pay a higher interest rate than someone whose history makes them "less of a risk" or a better customer.
Even if you already have a mortgage, a bad credit score can make it harder to get another one. This is especially true if you have missed payments to your current lender, which hurts your credit score.
A low credit score can be raised and even brought back up to a good level. You can ask for your credit score, and then you can see where there are problems. For example, a bankruptcy can stay on your score for up to 10 years and can have a big negative effect.
But if you are careful with your money, you can get "points" and change the way your rating works. This makes things like getting a mortgage or remortgaging much more likely. Simple things, like making sure that loans or debts are paid on time, can help a person with bad credit.
Even keeping an eye on your credit card can make a difference. Mortgage lenders think that people who owe less on more credit cards are less of a risk than people who owe more on fewer credit cards.
Your credit score can go up over time if you take care of it well. This can make you look like a good customer to lenders.
