How’s your credit score shaping up?

Your credit score determines whether loan, mortgage and credit card applications will be accepted. While a low credit rating is not the end of the world, as some people seem to believe, it is useful to know a bit more about your own credit history so that you can take steps to improve it.

Understanding your credit report

There are quite a few places you can access your credit report, particularly online, but some may charge a small fee. It can be worth paying a small amount to take a look at your credit report, as it can affect your borrowing and many of your choices later on in life. When you see your report, however, you might initially find it baffling. Here are a few examples of the information you can expect to find on your credit report:

• Previous credit agreements, including instances of missed or late payments

• Open and successfully closed (paid off in full and closed properly) accounts

• Past debt, bankruptcies  and home repossessions

• Current, past and linked (i.e. your partner’s information) names, addresses, DOB and other details

• Details of associations – for example, if you’ve ever had a joint account with someone, their information may be linked with yours

The first and most important thing you should do with this report is to check it all through, to make sure there aren’t any mistakes and that all the information actually applies to you. If there are any inaccuracies or errors, you can get them corrected.

Improving your credit score

If you’ve got a bad credit score, don’t despair. There are things you can do to boost your credit rating so that you can take out credit in the future. It may take some time, but actions like taking out a credit card with a modest credit limit and paying off your bill in full every single month for a year can make a huge difference to your score. You should also be closing old accounts, making sure to pay all of what you owe and shutting down everything properly.

Credit score myths busted

Contrary to popular belief, the following credit score myths and misconceptions simply aren’t true:

• There is a credit score blacklist that all credit card companies use – all lenders have different methods of assessing credit worthiness

• Checking your credit report can damage your score – it is noted on your record, but it shouldn’t have any effect on your credit rating

• One missed payment can damage your credit score forever – credit histories tend to only go back around six years, so in time, one missed payment will disappear from your records.