Credit scores on the rise during pandemic – how to check yours

The pandemic has done our finances a favour, according to new research.

Closed shops, leisure venues and services meant we were limited to where we could spend our cash, with many Brits reporting that they have spent less and reduced their debts over the past two years.

And the – albeit enforced – frugality has had an impact on our credit scores, with the UK average score on the rise, according to Experian.

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Although some families had a reduced income, the rise in credit scores was helped by the so-called ‘mortgage holiday’, as well as the emergency payment freeze which allowed people to defer payments on credit cards and loans.

And many people developed new financial behaviours during the pandemic, from spending less and saving more to reducing their debt, which have carried on beyond lockdown.

James Jones, head of consumer affairs at Experian, said: ‘It’s encouraging to see people’s credit scores improving on average.

‘While many of us managed to pay down existing credit using lockdown-related savings, others saw their incomes hit – but, thankfully, some had their credit scores protected by payment freezes.’

The research also looked at people’s credit scores throughout the UK, with the City of London leading the way in credit-worthiness, and Hull having the lowest average score.

Unsurprisingly, those over 55 had the highest score, with 21-25 having the lowest.

But why does your credit score matter and how should you check it?

Below we have answered all of the questions you need to know about your magical number and what it means to you.

Those with a good score will be offered the best credit card deals

What is a credit score?

Put simply, your credit score is a three-digit number that indicates how reliable you are at borrowing and repaying money.

The higher the number, the more likely you are to get the best deals when looking for a mortgage, loan or other credit.

Anything over 961 is considered excellent and anything under 560 is very poor, according to Experian.

How is my score decided?

Your credit score is determined by your credit report, which is compiled by the agencies TransUnion, Equifax and Experian.

This report is a record of the way you’ve managed your debts and bills in the past.

If you’ve never borrowed money before, it’s difficult for lenders to assess the risk of lending to you and your credit score will reflect that.

What’s in my credit report?

Your report will include all your credit agreements such as loans and credit cards, including any held jointly with other people, your history of credit repayment, including missed payments over the last six years and public records, such as County Court Judgments and the electoral roll

Why does my credit score matter?

Your credit score can determine whether you get accepted for a loan or credit card and impacts the type of deal you might be offered.

If you have a poor credit score, you may find you’re offered a higher interest rate or can’t get credit at all.

It can also affect other types of credit agreements, such as mobile phone plans.

Angry woman on mobile
Having a poor credit score can affect your ability to negotiate good deals on mobile contracts

Where can I find out my credit score?

The easiest way to find out is to use an online portal, such as Moneysupermarket’s Credit Monitor or Moneysavingexpert’s Credit Club.

The credit reference agencies, such as Equifax or Experian, all have to provide a statutory credit report for free, although some of the other services such as credit score monitoring could carry a fee.

How can I improve my credit score?

First and foremost, it is worth checking your credit report for any errors, which are often easy to fix.

Examples include duplicate or incorrect accounts, a wrong missed payments or even a fraudulent loan taken out in your name.

You need to prove to lenders that you’re a reliable borrower, which means if you don’t already have a credit card it could be worth getting one – but pay it off each month.

Having no credit leads does not necessarily lead to a good credit score, as it can make it difficult for credit agencies to assess you.

Other steps you can take include avoiding spending to the limit on credit cards, ensure you make your repayments on time and never withdraw cash from your credit card.

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