Building your credit score before buying

Posted on Friday, 12 April 2019 | Written by Hayward Moon

Your credit rating might not be the first thing you think of before buying, but a good credit score is something everyone should strive for.

A good credit rating is essential as it can determine whether you’re accepted for a mortgage, credit card and even a mobile phone contract or insurance policy.

What is a credit rating?
Your credit rating is information held on your credit file; also known as a credit report. It can differ between lenders, depending on the criteria used when you're assessed.

The information that's held on your credit file will help lenders determine: 

  • if you're a trustworthy, reliable candidate
  • how much money you can borrow
  • what interest rate to offer you

The most recent information in your file is the most valuable to any lender, as it allows them to see what your spending habits are like and your current financial situation. However, the last six years is kept on record.

If you have previously missed payments, defaulted on a loan or been declared bankrupt, your credit score will be negatively affected. You could be charged a higher interest rate and might not qualify for some loans as lenders seeing you as a high-risk customer.

How do you check your credit score?
You can check your score online for free. Don’t be lured into agencies that offer a free month-long trial, as there’s no need to pay anything at all.

What is a good credit score?
Different lenders have their own standards when considering credit score. However, if you have a good credit score with one main credit reporting agencies, it’s likely you’ll have a good score with your lender.

Examples of a good credit score include: 

  • scoring at least 4 out of 5 with Callcredit
  • scoring over 420 out of 700 with Equifax
  • scoring over 880 out of 999 with Experian

But remember, your credit rating doesn’t promise that you will be approved for credit or offered lower interest rates – it’s just one determining factor.

How you can improve your credit score?
There are several ways you can improve your credit score. You should:

  • register on the electoral roll
  • make sure all information in your file is correct 
  • make payments on time
  • check if you’re linked to another person
  • eliminate high levels of existing debt
  • demonstrate sensible spending habits

 If you’re struggling to increase your score, consider getting a credit-building credit card.

How will improving my credit score benefit me?
A higher credit score means companies see you as a low-risk customer; you will be more likely to be accepted for credit, including a mortgage.

The benefits of improving your score include:

  • lower interest rates
  • higher credit limits
  • access to more offers (loans, mortgages and credit cards)

There’s no downside to having a great credit rating –  start building today.

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