If you're a newbie to the world of credit, you might be wondering what a credit score is and why it's important. In simple terms, a credit score is a number that represents your creditworthiness. It’s based on your past credit and financial behaviour and is used by lenders, banks, and other financial institutions to assess how risky it would be to lend money to you. The higher your score, the more likely it is that a lender will lend you money. It’s pretty much as simple as that.
Having a good credit score can make a big difference to your everyday life. It can impact your ability to borrow money, rent a property, and even get a job in some cases. Your credit score can determine how much you pay for your mobile phone contract, or how much you’ll pay for your car insurance.
You can see pretty quickly that credit scores are taken into account in loads of different scenarios. That’s why it's so important to understand how credit scores work, so you can get to work on building yours!
How to Check Your Credit Score
You can check your credit score via your bank, or by visiting one of the major credit reference agencies like Equifax, Experian, or TransUnion directly. Credit reference agencies will usually provide a basic credit file online for free, but some additional services like credit score monitoring will most likely require a small fee.
It’s often said that checking your credit score will negatively impact your score. That’s not true - you can check as many times as you like and it won’t affect your score at all.
We reckon it’s well worth checking your credit score if you haven’t already - even if just to check that the information they have is accurate. This way you can catch any mistakes and fix them before they impact your credit applications.
So, What Is a Good/Bad Credit Score?
To make things a little complicated, the three main credit reference agencies use different scales. You can see how they grade credit scores below:
Experian:
- 961 - 999: Excellent
- 881 - 960: Very good
- 721 - 880: Good
- 561 - 720: Poor
- 0 - 560: Very poor
Equifax:
- 811 - 1000: Excellent
- 671 - 810: Very good
- 531 - 670: Good
- 439 - 530: Poor
- 0 - 438: Very poor
TransUnion:
- 628 - 710: Excellent
- 604 - 627: Good
- 586 - 603: OK
- 551 - 585: Needs some work
- 0 - 550: Needs work
Anything less than ‘good’ will probably mean you need to give your credit score some attention.
How to Build Your Credit Score
We have a separate guide on improving your credit score, but in a nutshell you need to:
- Pay your bills on time and in full
- Don't apply for too much credit over a short period of time
- Check your credit report regularly for errors and flag any inaccuracies as soon as you spot them
- Consider using a credit builder loan or secured credit card to establish credit history
- Keep old credit accounts open, as they contribute to the length of your credit history
- Be cautious when closing credit accounts, as this can lower your available credit and affect your credit utilisation ratio
- Consider becoming an authorised user on someone else's credit card - ideally someone with a good credit history!
Will Applying for a Yonder Credit Card Impact My Credit Score?
To help us understand whether you’re likely to be eligible for a Yonder credit card, we'll ask you a few questions. This initial assessment won't impact your credit score, as we'll only conduct a 'soft search' on your credit report. The results of this search will be visible only to you and won't be shared with potential lenders.
If you're eligible and choose to proceed, we'll then conduct a 'hard search' on your credit report, which may affect your credit score.
FAQs
How often should I check my credit score?
Checking your credit score once a month can help you stay aware of any changes, errors, or fraudulent activity.
Will checking my credit score affect it?
Checking your own credit score is considered a soft inquiry and won't affect your score. However, a hard inquiry by lenders or creditors can temporarily lower your score.
Can I improve my credit score quickly?
While building a good credit score takes time, making on-time payments and keeping your credit utilisation low can start to show improvements within a few months.
Will closing a credit card account hurt my credit score?
Closing a credit card account can affect your credit utilisation ratio and potentially lower your score, especially if the account has a long credit history or a high credit limit.
Can I have a good credit score without any credit history?
To have a credit score, you need to have a credit history. However, you can start building credit by opening a credit card or taking out a small loan and making timely payments.
Apply for a Yonder Credit Card Today
Anyone can find out whether they’re eligible for a Yonder credit card by clicking the ‘see if I’m eligible’ button at the top of the page. We’ll ask a few questions about your current circumstances and decide whether you’re eligible.
With so many awesome ways to earn and use points, Yonder is the perfect option for building your credit score and laying the foundations for a positive financial future.