Understanding your credit score

Understanding your credit score: how to check it, what affects it and how you can improve it. 

Getting a good credit score is something we’re all told we need to do, but often we’re only told about it when it’s too late. Understanding why a good credit score is important, and how you can improve it, can make a huge difference at important times in your life, such as moving home or buying a car, so it’s good to get to grips with it sooner rather than later. 

We know it can feel a bit like a minefield, so we’re here to break down the important bits and get you on the right path to credit success. 

Why is your credit score so important?

A good credit score shows lenders (such as banks and mortgage providers) that you can be trusted to pay any money you borrow back. Think of it as a mate asking to borrow a fiver. You’d be more likely to lend them the money if, in the past, they’d given it back quickly. If they’d held onto it for a while, you might think twice before saying yes. 

Everyone has their own individual credit score. If you ever apply for credit, this score will show the lender how risky you are. The lower your credit score, the riskier you’ll appear, and the less likely you’ll be to get the money. If you are approved, you might be charged a higher interest rate on repayments, meaning it cost you more than someone with a good credit score. 

In short, it quite literally pays to keep your credit score in order.

What impacts your credit score?

There are lots of ways your credit score can be affected, which means there are lots of ways it can be improved too! 

Your credit score is basically a history of every time you’ve borrowed money, repaid debts, taken out credit cards or applied for a loan. Here are a few of the things it’s based on:

Your payment record

This is every time you’ve paid back a credit card, a store card, a loan - such as car finance or a student loan - or your mortgage. It also includes business payments, if you’ve ever had to declare bankruptcy, close a business or been unable to pay your employees’ wages. 

If your record shows regular on-time payments, of at least the minimum amount due, your credit score will be improved. If you’ve ever made late payments or missed one completely, your score will be worse. 

The amount of money you owe

If you’ve nearly maxed out a credit card, or have a high outstanding balance on any loan, it will show lenders that you can’t afford to borrow much more. They’ll also look at your repayment pattern - if you’re regularly making repayments, even if you have a large amount left to pay off, it will prove that you can afford to manage your debt, which will then improve your credit score. 

How long you’ve used credit for

The longer your history of good credit management, the better your credit score will be. This is because lenders can see a clear pattern of borrowing and repayments, rather than just a small view of recent transactions. 

The types of credit you’ve used

A mix of different credit types will improve your credit score. If you’ve used a credit card, bought a car on finance, are paying off a mortgage and have taken out a bank loan, your credit score will be better than someone who’s just done one of the above, even if they’d paid it all off. However, you don’t need to have done one of every type of credit to score well. Instead, it’s good to have used different credits for their appropriate reasons, for example taking out a loan to do some home improvements, rather than to buy a supercar. This shows responsible borrowing. 

The amount of times you’ve applied for credit

If you apply for lots of different credit types in a short space of time, this will reduce your credit score. If you regularly browse the market for better rates of credit, this will still have an impact on your credit score, but only a minor one unless you apply for all the deals you find. 

How can you check your credit score?

You can check your credit score using a credit reference agencies or you can also do it using the Boshhh Mobile app. This will give you free lifetime access to your credit score, without the need to sign up to a SIM plan.

Your credit score will be three numbers, often ranging between 300 and 800. The higher your number, the better your credit score. It’s good to check your credit score if you’re thinking about applying for credit in the near future, giving yourself time to improve it if necessary. 

Download the Boshhh Mobile app (available on iOS and Android).

How can you improve your credit score?

Improving your credit score doesn’t have to be hard work, and a few small changes to the way you manage your money could make a big difference. Here are just some of the things you can do to make your credit score better:

Register on the electoral roll

It can be as simple as this. Registering your address on the electoral roll shows lenders that you’re at a fixed location, even if that’s student accommodation, shared housing or your parents’ home. It also means you can vote. 

Build your credit history

If you’ve never applied for credit before, you’ll have no credit history, making it impossible for lenders to know how reliable you are. Building your credit history can be as easy as taking out a credit card and using it to make occasional purchases, then paying off what you owe at the end of every month. 

Make regular repayments

Paying off your debt each month and on-time will show lenders you can be trusted, making them more likely to trust you with their money too. You can do this on credit cards, store cards, car finance or mortgage deals, whichever suits your lifestyle more. 

Know your limits

Credit lenders prefer it if you only use a certain percentage of your credit limits. Let’s say you have a credit card with a £5,000 limit on it, and you’ve used £2,500 of that, your credit usage will be at 50%. Generally a lower percentage will work in your favour, so aim to keep it below 30% to improve your chances of future lending.

Use Boshhh Mobile

Yep, your mobile phone SIM can also improve your credit score. When you take out one of our credit-building SIMs, every repayment you make will go towards that all-important number, making it super simple to show lenders you’re reliable. We have plans for all kinds of budgets - just download the app, choose a SIM and start seeing your credit score improve.