YOUR credit score is important when you apply for a credit card or loan – and a bad one could have you rejected for all deals.
This is because the score, which is sometimes called a credit rating, determines your creditworthiness to lenders.
If your score is low, banks may think of you as a risky borrower and could refuse to lend you cash.
Alternatively, you may be given a worse rate or deal than is advertised.
So what’s considered a bad score and how can you improve yours? Below we explain what you need to know.
What is a bad credit score?
FICO, the most widely known credit scoring system, and its rival VantageScore both use a range of 300-850 points.
Naturally, the higher your credit score is, the better chance you have of getting the best deals.
A bad credit score, typically known as “fair” on both systems, is between 580 and 669 points on the FICO scale and between 601 and 660 points on VantageScore.
Meanwhile, a “poor” FICO score is anything below 579 points.
How can I check my credit score and report?
THERE are plenty of ways to check your credit score for free.
For example, many credit card companies, banks and lenders have started providing credit scores for their customers.
It may be on your statement, or you can access it online by logging into your account.
There are also other free credit scoring websites, such as Credit Karma, Creditwise and Credit Scorecard and WalletHub.
Meanwhile, the credit report is the information that lenders and companies use to calculate your credit score.
You’re typically entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies.
These agencies include Equifax, Experian, and TransUnion.
However, due to the Covid pandemic, you can get free credit reports every week until April 2022.
You can order this from annualcreditreport.com, the only authorized website for free credit reports.
Alternatively, you can call 1-877-322-8228.
If you’re using VantageScore, a poor rating is between 500 and 600 points and a “very poor” score is between 300 and 499.
A good credit score sits between 670 and 739 on the FICO system, while 740-799 is considered very good and anything above 800 is excellent.
Meanwhile, VantageScore considers a score between 661 and 780 to be good, and those above 780 are excellent.
How can I build my credit score?
There are a number of things you can do to improve your credit score, ranging from cutting debt and checking your report for errors.
Pay your bills and debt repayments on time
Paying your bills and debt repayments on time is one of the biggest contributing factors to a good credit score.
A missed or late payment can do serious damage to your score and stay on your report for up to seven years, so make sure you pay your bills on time.
Reduce the amount of debt you owe
Another way to improve your credit score is by paying off debt, rather than moving it around.
Also make sure to keep credit card balances as low as possible.
Check your credit report for errors
Mistakes happen so it’s important to make sure your report is correct.
We’ve explained how to get a copy of your credit report above.
If you spot anything that’s incorrect, contact your lender.
Avoid making several credit applications in a short time
If you make several applications in a short period of time, this will make you look desperate to lenders and they won’t be keen to offer you credit.
It’s important to only apply for it when you need it.
Before you apply for anything, make sure to use soft search eligibility checkers to see whether it’s likely you’ll get the deal you’re after.
In 2020, a new credit scoring system was introduced – and it can stop you from getting accepted for cards and loans.
We’ve explained what credit scores you’ll need to buy a house and lease a car.
Plus, we’ve rounded up the best credit cards, including those earning you reward points.