If you’re hoping to hit the first rung on that elusive housing ladder, you might want to listen up. Yes, our financial foibles are being meticulously monitored for patterns all the time. You might’ve heard the term ‘credit rating’ before, but did you know it could be used to your advantage? Observe…
What's the deal?
Am I being rated on my spending? Because, honey, I deserve top marks. Well… kinda. Chartered financial expert and author of The Money Edit, Makala Green describes a credit score as ‘a snapshot of what your finances look like, which shows how you manage your money and whether you’re a trustworthy person to lend to’.
A credit score ranges from 0 to 999 – with 999 being the best score – and is used by any organisation that offers products on credit (think banks, phone companies, that sofa you’ve had your eye on), to determine how much of a ‘safe’ bet you are – ie, how likely you are to pay them back.
Your credit file includes ‘a record of all your financial transactions, including things like whether you have any other loans outstanding’, adds Laura Whateley, author of Money: A User’s Guide, and is kept with one of three reference agencies in the UK: Experian, Equifax and TransUnion.
So, how do I get a good credit score?
Fear not, there’s a lot you can do to improve your credit score including successfully borrowing money and paying it back. ‘You can actually get a poor credit score just from having very little evidence of having borrowed before,’ says Whateley. One easy solution she recommends? ‘Take out a credit card and use it little and often, always repaying it on time,’ she advises.
But sadly, it takes more than frequent Vinted hauls, explains Green, who says ‘lenders go by the three Cs – character, capital and capacity – to compile your mark’. Character looks at ‘everything that you’ve done in the past with your finances’; capital is about whether you’ve got the funds to repay the loan – so salary and savings; and capacity will consider your employment, borrowing history and how long you’ve held a bank account for. ‘I always stress to people if you’ve got a bank account that you’ve had for years don’t ever close it as that really helps improve your credit score,’ says Green.
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Anything else?
Mercifully, lots. ‘If you’re not keen on a credit card, you can register to have your rent payments included on your credit file and can even include direct debits to things like Netflix and Spotify with Experian Boost,’ explains Whateley. It also helps to be on the electoral register.
Green points to various free services like Clear Score, Credit Karma or Experian that can do a ‘soft check’ on your score and will send you monthly updates on how to improve it. It can take months (up to six years if you go into arrears) to renew your rating, so implementing changes well in advance of requiring borrowing (such as a mortgage) is a good idea, Green says.
But while a credit card is a useful tool, ‘don’t max it out too often,’ Green cautions, ‘because from a capacity perspective, it doesn’t seem like you’re managing your money really well’. Instead, aim to use no more than 30% of any credit card or overdraft regularly.
Harriet Hall is an award-winning journalist and the Features Director at Cosmopolitan. Most recently she was awarded Best Feature for her investigation into Andrew Tate and online misogyny at the 2023 Write to End Violence Against Women awards and the BSME for Best Lifestyle Journalist in 2022 for her work covering women’s safety, women's health, politics and pop culture. As a journalist of over a decade, her work has seen her interview celebrities from Zendaya to Zac Effron and politicians including Jeremy Corbyn (just five days before the 2017 general election); report on fashion weeks and take on stunts in the name of feminism. She has written for a range of publications including The Independent where she ran the lifestyle desk for four years, Evening Standard, Vogue, BBC News and Stylist. Harriet also regularly appears across numerous platforms to discuss her work, from Sky News to Radio 4 Woman’s Hour and on panels such as at the prestigious Woman of the World Festival. Her first book ‘She: A Celebration of 100 Renegade Women’ was published by Headline Home in 2018 and you can find her Tweeting, Instagramming and on Linkedin when she isn’t curled up on the sofa with a good book and the smallest dog in the world.
