Money pack

A pension is a long-term investment pot for retirement, made powerful by two things: government tax relief that boosts every contribution, and decades of compound growth. In a defined contribution scheme you build a pot you later draw down; in a defined benefit scheme your employer guarantees an income for life. Starting early matters far more than contributing more.

A mortgage is a loan secured against a property: if you stop paying, the lender can repossess and sell it. Each monthly payment splits between interest, which is the lender's fee, and capital, which reduces your debt. Early on almost all of it is interest; only in the later years does most of it start reducing what you owe. That schedule is called amortisation.

A credit score is a statistical prediction of how likely you are to miss a debt payment in the next two years. Lenders report your account history to credit bureaus, and a scoring model weighs five factors: payment history, amounts owed, length of history, new applications and credit mix. Payment history and credit utilisation carry the most weight.