Your credit score is one of the most critical factors lenders consider when you apply for a loan. It reflects how well you manage your finances and helps lenders assess the level of risk involved in lending to you. Understanding how your credit score works, and how to improve it, can have a big impact on your finances and your ability to secure loans at better rates. Let’s break down the basics of credit scores and what you need to know.
What is Positive Credit Reporting?
Positive credit reporting is a system that tracks both the positive and negative aspects of your credit activity. This means that not only do missed or late payments appear on your credit file, but so do the times you’ve successfully paid credit cards, Buy Now, Pay Later (BNPL) services, and other open and closed loans. Positive credit reporting helps create a more balanced view of your financial behaviour, benefiting those with good spending habits.
For instance, consistently paying your debts on time positively impacts your credit file and may result in better loan offers in the future. This system encourages borrowers to maintain good financial habits, as even small positive actions—like timely credit card payments—are noticed by lenders.
What is a Good Credit Score?
Credit scores typically range from 0 to 1,200, depending on the reporting agency. According to Equifax, the scoring breakdown is generally as follows:
A "good" credit score falls between 661 and 734. Lenders often view applicants within this range favourably, but a score above 734 increases your chances of being offered the best terms. The higher your score, the lower the perceived risk, which means lenders may offer lower interest rates and better loan conditions.
If I Have a Low Credit Score, How Do I Improve It?
If your credit score is less than ideal, don’t worry—you can take steps to improve it:
Improving your credit score takes time, but these small actions can make a big difference in the long run.
Enquiries: The Impact of Too Many Credit Applications
Each time you apply for credit, it triggers a "hard enquiry" on your credit file. While a single enquiry isn’t usually a problem, multiple enquiries in a short period can lower your score. This is because frequent credit applications suggest you might be experiencing financial difficulties or are desperate for funds, which increases your perceived risk in the eyes of lenders.
Before applying for multiple loans or credit cards, it’s a good idea to get pre-approval or conduct a "soft check" to see if you're eligible, as these types of checks don't affect your credit score. At Greenside Finance, we offer this service to help you understand your options without impacting your credit.
Are Payday Lenders Any Good for Credit History?
While payday loans might seem like a quick fix when you need cash fast, they can harm your credit score. Payday lenders often charge extremely high interest rates, and frequent reliance on them can be seen as a sign of financial instability. If a lender sees that you’ve used payday loans regularly, they may view you as a higher risk, which can affect your loan approval or interest rate when you apply for traditional financing.
While a payday loan may help if you're in a bind, it's generally best to avoid them, as they can do more harm than good to your credit history in the long run.
Conclusion: Improving Your Chances with Greenside Finance
At Greenside Finance, we understand that not everyone has a perfect credit score. If your credit file is less than ideal, we can help you take the right steps to improve it. We offer free credit score checks and will review your financial situation to help you find the best lender suited to your needs and secure the best rate available. Our team will guide you through the process, and if there are any concerns, we’ll inform you on how to address them to boost your chances of approval.
Understanding what lenders look for on your credit file and how to maintain a strong score is key to unlocking better financing options in the future. Ready to explore your loan options? Contact Greenside Finance today!
