Most of us will have heard the phrase ‘Credit score’ in the past but you’d be forgiven for not having a clue what it really is or why it’s so important to have a ‘good’ score. In a nutshell, your credit score is used by companies to see how financially healthy you are before they decide whether to loan you money, give you a credit card, a mortgage or even agree to a mobile phone contract.
Most companies you deal with will share your payment history with credit reference agencies such as Experian, Equifax and Call Credit. When you apply for a loan or mobile phone for example, the lender will check with these credit reference agencies to see how ‘good’ your payment history is before agreeing to your application.
If you have a history of missed payments – for example, paying late or not at all – this will result in a ‘poor’ credit score which could put companies off giving you credit or if they do the rate of interest is likely to be higher.