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Your Credit Score Explained What are the ingredients for the perfect credit score? Until now, what goes into your credit score has been hidden by Credit Reference Agencies, like an old family recipe. What are CRAs, you ask? They’re the folks who get your credit and finance info from lenders. They’re like magpies for credit ...

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Your Credit Score Explained

What are the ingredients for the perfect credit score?

Until now, what goes into your credit score has been hidden by Credit Reference Agencies, like an old family recipe.

What are CRAs, you ask? They’re the folks who get your credit and finance info from lenders. They’re like magpies for credit stuff.

The good news? We’ve found the recipe!

The proof is in the payment

Late payer? Timely payer? Non-payer? Yup, we’re talking about how you behave around your payments.

Why? Because payment behaviour makes up 48% of your credit score. That’s credit payments, for things like credit cards and phone bills. It looks at:

  • On-time payments
  • Late payments
  • Missed payments
  • How recently you missed payments or paid late.

Basically, pay what you’re meant to when you’re meant to, and your credit score should rise (bloomin’ marvellous).

If you don’t, it’ll probably sink.

Remember, how you treat your payments makes up nearly half your score. So, it’s important you get this together.

Don’t bite off more than you can chew

Do you eat too much cake? Let’s face it, we probably all do.

But, eat too much into your credit, and it could eat away at your credit score. That’s because how much of your available credit you use makes up 21% of your credit score.

As a rule, you should try to use less than a quarter of your total available credit.

What does this mean?

It means CRAs want you to have cake, but don’t want you to eat it (not much of it, anyway).

Knowledge is knowing tomatoes are fruit. Experience is not putting them in a fruit cake

You might know a lot about money and credit, but lenders and CRAs don’t care about that. What they care about is your experience — that is, your credit history.

Why’s that? Well, your credit history shows if you’ve got the skills to handle credit responsibly. It gives more of an idea of how you manage it.

It’s like being told you need more experience when you go for a job interview. The same applies for credit. You need the experience before lenders and CRAs have a good idea of your credit reliability.

It’s pretty important, which is why your credit experience makes up 21% of your credit score. It looks at:

  • What credit accounts you have
  • How long you’ve been using them

So, if you’re a credit newbie, you won’t have much experience — and your credit score might be lower.

Craving something sweet?

Sometimes, we have to resist temptation when the sweet tooth tingles. The same is true for credit.

This is called your desire for credit, which makes up 5% of your credit score. It looks at:

  • What credit accounts you’ve opened
  • When you opened them

If you open a lot of new credit accounts in a short time, you’ll seem eager for credit (or worse, desperate). This could lower your credit score.

Have a finger in every pie

Let’s face it: the best sweet feast is when we get to try a bit of everything. A profiterole here, a sliver of gateau there, a couple of spoons of trifle…

Variety is the spice of life, right? Well, apply that to credit. That’s because types of credit make up 5% of your credit score.

Types of credit include:

  • Overdrafts
  • Loans
  • Credit cards
  • Mortgages
  • Mobile phone contracts
  • Utility bills
  • Finance agreements (such as buy now, pay later)
  • Gym memberships

If you have a good reputation for managing different types of credit, you could get a better credit score.

Just like a sweet feast, moderation is key. It’s okay to try a bit of everything — providing it’s not too much and you’re responsible.