Gen Z Money Matters Series: Credit Score

Hello everyone and welcome back to this series. In todays edition we will cover credit scores. A credit score is extremely important as it allows an individual to apply for a mortgage, amongst other things that an individual may not be able to afford outright. A credit score is a three digit number that indicates how reliable an individual is at paying back borrowed money. A credit score ranges from 'very poor' to 'excellent' and is used by lenders such as banks or credit unions to help determine whether an individual qualifies for a certain loan, e.g. a mortgage or car loan. A higher credit score gives an individual a better chance at being accepted for a loan as they are seen as a lower risk. Individuals can build their credit scores in a variety of ways such as making credit card payments on time and by paying off the loan in full at the end of each month. Individuals can also build their credit score by keeping their credit utilisation low. Another way to build good credit is by opening and managing a current account, while staying within any agreed overdraft if applicable. You can also improve you credit score when making regular direct debit payments, such as a monthly phone bill. A good fact to know is that individuals are less likely to be accepted for credit if they are not on the electoral roll, being registered can improve your credit score and it is one of the easiest ways to do so. A credit score can take time to build, so make sure you keep a good credit history and always pay your bills on time if not it will negatively impact your credit score. Overall, credit scores are a useful tool when used correctly but without knowing how to use one it results in a poor credit score which can impact you later on in life when it comes to obtaining a mortgage, etc.