Martin Lewis gives expert advice on credit score
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That’s enough to buy a one-bedroom house outright in Birmingham without the need for a mortgage. It’s often recommended by experts and is so easy to do that millions of Britons could benefit but are missing out.
When it comes to one’s credit score, the benefit of a good score versus a poor one shouldn’t be underestimated.
Not when it could save the ordinary Briton £129,000 over the course of their lifetime.
A credit score depicts a consumer’s creditworthiness – the higher the score, the better rates a borrower is offered.
Akansha Nath, Head of Partnerships at Credit Karma who conducted the research, said the first step towards looking after one’s credit score is to not overspend.
She said: “After such a financially difficult year, encouraging shoppers to only spend what they can afford is easier said than done.”
Whereas the occasional treat shouldn’t do too much damage, longer term this could have a detrimental effect.
Ms Nath added: “Tackling debt or money worries as early as possible can limit their long term impact.
“Talking to your lenders, or seeking independent support can help to restructure debt in a more manageable way, and reduce the future impact on your ability to borrow later down the line.”
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A credit score is based on someone’s credit history which takes into consideration how many active accounts they have, how much debt they hold and their repayment history.
Although it pays to be savvy from 18, it’s never too late to improve it.
Ms Nath shared some top tips to help people strengthen their credit score.
Her advice could help people secure lower rates for mortgages and loans, saving them thousands even if they are late getting started.
- Use credit – While it’s good to keep your credit balances low, it’s suggested people do use some credit every month. Paying bills off in full, on time, shows that people are good at managing their money, Ms Nath said.
- Check one’s credit score and report regularly. She also suggested people ensure they recognise all searches and financial products so they can tell if there’s anything fraudulent.
- Pay bills on time. Missing a payment can significantly impact an individual’s credit score – even if it’s only by a day or two.
- 4 Get on the electoral roll. This step provides proof of address.
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Figures from the Bank of England show that consumer borrowing on credit cards jumped to its highest level in more than a year in November 2021.
Credit Karma says it highlights that it’s more important than ever for people to take a look at their accounts and start re-evaluating their financial priorities.
Ms Nath added: “The total value of a good credit score has been quantified at £129,000 – in terms of the interest savings when comparing a good to poor score across a lifetime of borrowing (age 20-68).
“It gives those with better scores can secure lower rates for mortgage, credit cards, loans and car finance.”
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