11 Facts About Credit Scores You Should Really Know

You might be surprised by what you don't know! CreditWise is a new tool from Capital One that gives you free access to your credit score and helps you understand the factors that affect it. Find out more.

1. You need to understand WHAT a credit score is. In effect, a credit score helps lenders determine how trustworthy you are to lend money to.

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When a bank or other organisation considers lending you money, they want to ensure they can trust you to pay it back. They use your credit score to predict your future behaviours. However, your credit score is a measure of your past actions. The logic goes: If you've always been responsible, you will probably continue to be responsible. It’s important to take your credit score seriously because Future You may need a good score for things like getting a mortgage amongst other important life things.

2. Your credit score is checked when you apply for many different things – everything from a car loan to a mortgage to a new credit card and even a mobile phone plan!

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It’s important that you know your score, because lenders will. Knowing your score should be one of your financial habits, such as paying bills on time or keeping track of your bank balance. Knowing what your score is will help you determine whether you need to make some changes to improve it.

3. It's possible to have multiple credit scores at the same time.

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Different credit agencies (the people who tally your score) use different ways to determine your score. Therefore, you may have a different score from each agency at the same time. It’s important to check your score across credit reference agencies to ensure each has the right information about you.

4. Your credit score changes over time based on your financial habits and behaviours.

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A few different factors affect this. Things like your credit usage, the length of your credit history, any existing debt, keeping within your credit limits, making timely payments, and even ensuring you’re on the electoral roll. This is a good thing as it gives you the opportunity to build the credit score you want over time in a number of ways.

5. Your credit score is not a judgement of your success or intelligence.

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Credit scores are not "right" or "wrong". They aren't measures of your importance as a human being. They simply measure how risky you are in the eyes of a lender. That being said, a strong score will only help you in life. The good news is that there are steps you can take to start to improve your credit score once you set your mind to it.

6. One way to improve your credit score is to use credit responsibly over a long period of time.

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A long credit history is one great way to improve your credit score. This means using the credit that you have wisely by staying within your credit limit and paying it off on time (and where possible in full) to avoid interest charges being applied. Using a credit card for purchases and paying off your balance every month will demonstrate responsible behaviour over time.

7. Being on the Electoral Roll is a fast and simple way to help lenders verify your identity for credit purposes.

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Make sure your address is up to date. If it's not, update it. It's a fast and easy way to help credit agencies confirm that you are you, which is an important part of the credit check process. You can update your address here.

8. Credit builder cards exist to help you start building your credit history or improve a poor credit score.

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If you don't have a credit history, it can be hard to qualify for a credit card in order to build that credit history. But don't dismay. Credit builder cards can help. They work by lending you a smaller amount of money. Just ensure you pay off your balance in full every single month to avoid interest charges. Over time this provides you with a history that shows you can be responsible with credit.

9. Missing a payment on anything (mortgage, credit card, utilities) may lower your score.

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If you aren’t paying off your existing credit, you will have a hard time convincing lenders that you’re ready for more credit! Lenders look at how much credit you have available when they are considering your application for more credit.

10. Having too much existing credit may lower your credit score.

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Keeping credit in check is important for credit score maintenance. Don't apply for more credit until you've sorted out any existing problems that may be lowering your score.

11. Lastly, it's a good idea to keep an eye on your credit score.

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Routine check-ins are important to ensure your credit score is accurate and up-to-date. Knowing your score is the first step. Otherwise, you can’t be sure it’s the score you need it to be to get the credit that you want. It’s also a good way to protect against fraud. If your credit score looks wrong, that may be a sign of fraudulent activity. Knowledge is power (and protection)!

Managing your credit score is something you can learn to do more effectively. CreditWise is a new tool from Capital One that gives you free access to your credit score and helps you understand the factors that affect it. Find out more.