Whilst the average credit score in the UK may have taken a hit in the wake of the great recession, there are signs that this has finally started to improve of late.
More specifically, the average score has increased from 346 to 380 over the course of the last 12 months, as households finally get to grips with their finances and move towards a more secure fiscal future.
But does a bad credit score mean that you cannot achieve success in your personal or professional life? Let’s find out.
What’s a Good or Bad Credit Score?
Whenever you apply for credit, lenders use the information on your credit report and application form to arrive at a decision.
To ensure that they make an informed decision, lenders utilise these various data sets to calculate a so-called credit score. Whilst each individual lender will have a different way of calculating an applicant’s precise score, it’s accepted that higher credit scores increase your chances of achieving success.
But what constitutes a good credit score? Sadly, there’s no magic number here, due to the various methods used to calculate scores and the individual factors that lenders consider as part of the process.
Companies also use different number ranges to showcase their scores, with Experian rating consumers between 0 and 999 and Clear Score operating an entirely different system.
In the case of Experian, the good score is generally considered to be anywhere between 881 and 960, but in truth you’ll need to measure your number against the unique system used by the relevant lender.
What Can you do if you Have a Bad Score?
As we’ve already touched on, many people were left with a poor credit score after the great recession more than a decade ago.
However, it’s fair to say that the financial market subsequently adapted to cope with the fall out of the fiscal crisis, by developing bad credit products for both individuals and businesses alike.
This range of products include everything from credit cards to bad credit business loans, the latter of which can help to fund new ventures and provide small cash injections to enterprising start-ups.
This type of loan has certainly helped to maintain a vibrant and competitive small business economy in the UK, with SMEs now accounting for an estimated 99.9% of all private sector firms nationwide.
Whilst these products offer help and assistance in every walk of life, however, it’s important to adopt a long-term outlook and take proactive steps towards improving your credit score going forward.
This means ensuring that you’re registered at your current address on the electoral roll, and removing any outdated or previously settled accounts.
At the same time, try to maintain at least one open credit card accounts, as sustaining a regular and manageable repayments creates a trail of positive transactions that can actively improve your score over time.
