Your credit score is a numerical value which is used by most mainstream lenders and finance providers to determine whether you are eligible to borrow money, car finance, credit cards or get a mortgage. A credit rating is kept on record by one of the three main credit reference agencies in the UK including Experian, Transunion or Equifax – and this information is accessed by a prospective lender when applying.
The idea is that your credit score can always go up or down depending on how well you have maintained financial payments for such things as your mobile phone, credit cards, short-term loans and more.
You are automatically given a credit score of 0 when you turn 18, so it is common to use credit cards and get into the pattern of repaying them each month on time to build up your score. However, the result of defaults or missed payments can cause your credit score to fall and make it very hard to get approved for future finance.Young people who have not kept an eye on their monthly repayments or looked after their credit score are now finding themselves ‘held back’ and cannot get approved for basic loans or get on the property ladder through a mortgage.
A spokesman from properfinance.co.uk, a price comparison site, explained: “Young people can often find themselves in a debt cycle, using too many credit cards, and not realising the long term implications of this. However, there is a lot more available now to help consumers find their credit score, including the credit report available from the government and a lot of mainstream products to help you build up your score such as credit builder cards.”
“You also have the option of using credit score sites like Noddle, ClearScore and Experian to help you monitor your score regularly and build it up. There are free trials available, so it is worth getting to grips with this and how it works.”
“Whilst these companies have big marketing budgets, maybe there is a wider conversation to be had about offering more information to young people, through high schools, colleges and universities too – it is certainly a project for local governments, debt charities and creative agencies to look at.”
For young people who are new to using credit facilities, some basic things can be done to improve and maintain your credit score. This includes joining the electoral roll to confirm your name and address with the local authorities, also giving you the right to vote in upcoming elections. Other things you can do include closing any store cards or credit cards that you do not use and very simply making sure that your mobile phone bills and cards are always repaid in full or in part on time each month.
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