A credit score or rating, which is also referred to as your credit record, is a numerical value that banks employ to determine the reliability of a potential borrower. It serves as a comprehensive account of your financial history, including financing, credit, and expenses.
What is the methodology for determining my credit score?
Consumer credit reference agencies in the United Kingdom determine the credit rating. The following are a few that you may recognise:
- Callcredit
- Equifax
- Experian
Lenders evaluate your credit score when considering whether to extend you a loan. The term “borrow” encompasses a variety of lending products, including mortgages, credit cards, and financing products. They employ the score to determine the interest rate they will charge you if you are approved for the loan, as well as to determine whether or not to approve you.
In the event that the UK government determines that you are eligible for benefits, they may also consult your credit score. Additionally, they employ it to monitor outstanding taxes.
What methods can I employ to enhance my credit score?
This is why it is crucial to consider your credit record at an early stage, as it may require a significant amount of time to improve. Approval for lending products, including mortgages and mobile phone contracts, can be significantly more challenging when one is self-employed. Consequently, your prospects may be further diminished by a subpar credit score.
There are several actions you can take to enhance your chances:
- Use a certified accountant to prepare your Self Assessment tax return and ensure that your accounts are current.
- Ensure that you retain all bank statements, tax returns, and other forms of income documentation.
- Also, you may request your SA302 form from HMRC. It displays your total income and the amount of tax that is owed.
- Complete your tax return as early as possible each year.
- Pay your invoices via direct debit, provided that you are able to afford them and will not be late.
