According to a new study, nearly two-thirds of Brits don’t fully understand the effect of credit card behavior on their credit score.
While about one-third (31 percent) say they have a “strong” credit rating, about one in five (18 percent) don’t know exactly what their credit score is.
The data, compiled through Compare the Market, follows the site’s most recent Currency Action Index, which shows that three-quarters (76%) of families with children with household credit cards have struggled to pay their monthly balance over the past six months due to the emerging burden of living. . .
Jonathan Such, head of sales at First Response Finance, said: “Failing to understand the weight of your credit score can have a significant effect on your wellbeing and restrict your opportunities. That’s why it’s critical that you have a clear understanding of what it is and how you can do it. Update yours.
“It is true that it can be a concept made up of contradictory opinions, advice, and beliefs. In addition to this general confusion, we are also facing a cost-of-living crisis in a post-pandemic world. No one can blame you for feeling a little overwhelmed.
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In light of this, Mr. Such delved into the basics for other people to start the year off right.
Mr. Such necessarily said that a credit score is an assessment that predicts a person’s ability to repay their debts.
He explained: “Every time you borrow money, for example when you receive a bank loan or buy a product with financing options, this data is recorded and how you react to debt is monitored. “
Credit bureaus, such as TransUnion, Equifax, and Experian, then work with banks, mobile phone companies, and other major stores to help those companies know if the user applying for credit is more likely to pay it off.
Mr Such said that each company has its own scoring formula and will therefore produce other scores for the same person that take into account the same factors.
These typically include:
A credit company will give a user a low (bad) credit score if they have a history of paying their expenses on time or if they owe too much money.
Here’s what the company considers poor:
That said: “The effect of a low credit score can be negative for your quality of life and, in particular, limit your monetary opportunities. Consequences can come with difficulty obtaining loans or credit, higher interest rates, and limited access to monetary opportunities such as credit card options.
Common reasons for poor credit scores come from overdue or late payments, maximum credit card balances, and too many credit inquiries.
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Tal said, “Some private debt is normal, especially for young families or small business owners, but it’s how that debt is managed that determines what your long-term financial situation will look like. “
If a person’s credit score is rarely what it deserves to be, Mr. Such said, “Don’t panic!There are sure steps you can take to make sure your score is earned at a steady pace and enjoy all the benefits you come with with a smart score.
Listing a few things to try, Mr Such said people could pay all their bills on time; pay off credit cards; maintain a diverse credit mix; or limit new credit applications.
Such said: “It’s the end of the world if you have a bad credit history, but it can unnecessarily complicate things.
“For example, First Response Finance offers clear and simple vehicle finance agreements even for those with a poor rating.”
However, to avoid disappointment, Mr Such suggested: “Start taking the necessary steps to improve your credit score today. It’s never too late to give yourself the best possible start at securing credit in the future, even if it’s something you don’t think you need right now.”
Those who think their credit score can’t be fixed by following the steps above can seek professional help. Free, confidential, independent advice on managing debt problems can be obtained from charities such as National Debtline, Citizens Advice and StepChange Debt Charity.
Tal said, “This deserves to be made a lot less difficult on your credit score, which is the best end result if time is of the essence and you want to act quickly. Surely there is no shame in asking for help if you want it. .
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