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Given the importance of a credit score, many assume they are always correct, but this isn’t always the case. Although instances of credit scores being incorrect are rare, it does happen. As such, those in doubt about their credit score should check to ensure that credit reference agencies can correct any incorrect information.

Mistakes That Can Occur Regarding Credit Scores

The reasons why a mistake is present on a credit file could be due to more than one reason. In some instances, there could be administrative errors. However, there could be times when similar names and addresses need to be clarified, meaning that a person’s credit score is not a true reflection of their financial status.

If there are entries you don’t recognise when checking a credit file, then fraudulent credit applications could have been made using your name and address. Although this can be concerning, you can take some steps to ensure that you can update this information as soon as possible.

Notify the Relevant Credit Reference Agency

If you find incorrect information on one credit report, it can be worthwhile to check other credit reference agencies to ensure there is no inaccurate information recorded on those. You should then notify the relevant credit reference agencies and advise them of the fraudulent activity.

If you can identify the lenders, you should also contact them to make them aware of the fraudulent entries.

Report the Fraud to The Police

The police should be contacted as soon as possible, as it ensures the fraud is documented. After filing a police report, it is advisable to notify the Federal Trade Commission, which will complete an identity theft report.

Verify Your Documents Online

If a credit score is lower because of fraudulent activity, verifying your documents online can be a good idea. There may be instances when fake documents have been forwarded to lenders. Using online documentation verification ensures that you show lenders you are who you say you are, allowing incorrect information to be corrected efficiently.

Some people may be worried that verifying documents online is time-consuming, but it can take as little as 30 seconds to prove a document is genuine. Furthermore, you will be given a certificate recognised as legitimate, making credit file corrections easier.

Steps to Reduce Online Fraud

As registering for websites is so common, many may think there is no risk when filling out forms online. Although most websites conform to regulations regarding protecting private data, there will be some nefarious websites with sinister intentions.

If you’re browsing a website that is news or does not offer any form of security, it is advisable to look elsewhere for what you need. Reading online reviews is another fantastic way of telling genuine companies from fraudulent online users.

The prospect of fraud can be a worrying one, but as long as you’re actively checking your credit record and are aware of the risks online, staying safe while browsing the Internet will not be an issue.

Credit scoring can be extremely complex and confusing for people who have never come across credit ratings before. Even if you don’t understand all of the detail around credit cards – and to be honest, you don’t really need to – most of us know that having a healthy credit score helps you get loans, credit cards and other credit products. Loans and mortgages may seem a long time off when you are a student, but it’s never too early to start thinking about steps you can take now to create a healthy credit history and make things easier when you finally get to the stage of buying property or taking out a car loan.

What Is a Credit Score?

In the most basic terms, a credit score is a grade given to you by lenders to decide how much of a risk you are.

If your credit score is very low, the banks might decide that you are too much of a risk. They may either refuse to deal with you at all, or only offer you products with much higher interest rates than they offer to customers with better scores. The three main agencies which manage credit scoring in the UK are TransUnion, Equifax, and Experian, and these operate independently from the banks and other financial organisations. Using a wide range of information, the credit reference agencies will assess all the information they have about you and come up with your credit score number. As each agency uses a different scale, numbers will be different on each site.

What Affects My Credit Rating?

The credit agencies look at a wide range of things when deciding how much of a risk you are. Perhaps the most important of these factors is your track record – have you made payments regularly in the past, indicating that you can be trusted with credit? Student loans are not included in this. They will also look at the amount of credit you have available to you, and how much of it you’ve used. You’re in a stronger position if you aren’t permanently living in your overdraft, with a maxed-out credit card. If you have made several applications for more credit in a short period then this might go against you too, as it creates the impression that you are in financial difficulties and desperate to access more funds.

Another of the main factors which affects students is whether you are registered to vote at the address where you are applying for credit. This often causes problems for students who are registered to vote at their parents’ address, but who apply for a credit card or mobile phone contract using a student hall of residence address.

Length of Credit History

Students often find they have a low credit score simply because the credit referencing agencies don’t have enough information to form an opinion on whether you’re a good risk or not. It’s never too early to start thinking about steps you can take to improve your track record with credit referencing agencies. Having a mobile phone on a pay monthly contract can help, especially when you set up a direct debit to make sure it’s paid every month on time without fail. Insurance policies for home or car where you pay monthly rather than in an annual lump sum are also classed as credit agreements. Managing these sorts of products well, never defaulting or making late payments, should help you establish a good track record during your time at university, which stands you in good stead for when you start work and think about taking out larger amounts of credit in loans or mortgages.

We’re all familiar with having to fill in forms when applying for a new job, attending interviews, and perhaps showing your passport to prove you have the legal right to work in the UK. Getting a new tenancy agreement on a rented property can seem like a similar process, with forms and evidence to be supplied. In many situations there is another level of checking too – the Adverse Credit Check. This mainly applies to people who are applying for jobs where they will be controlling accounts or have access to cash, but also to prospective tenants wishing to move into private rented accommodation.

Why Do Employers or Landlords Want to Check?

From an employer’s point of view, they want to make sure that people employed in jobs where they have access to other people’s money aren’t in a shaky financial position themselves. They are concerned that people who are struggling to make ends meet may be tempted to dip their hand into the till. In other situations, such as people who join the police or prison service, the concern is less about direct theft, and more about being targeted for blackmail.

Many positions in the legal and financial services industries have the legal requirement of a credit check before the employee starts.

From a landlord’s point of view, they want to make sure that anyone given a tenancy agreement is going to be able to afford the rent every month as managing tenants who can’t pay can end up costing the landlords thousands in legal fees.

Carrying Out the Credit Check

Employers or landlords can’t carry out a credit check without getting your permission first, and it’s usually clearly stated in the job advert if a credit check is needed. Each employer will have their own process for completing adverse credit checks, and most will use an external agency to help them. Usually, all you will be asked to give as a job applicant or prospective tenant is your name, date of birth and address, and to sign something consenting to the checks.

Adverse credit checks will look at your credit score as with any other sort of credit check. Employers aren’t really interested though in how much credit you have and how much you owe on your mortgage. Adverse credit checks look for any “red flags” on your credit history such as regular missed payments, defaults, county court judgements (CCJs) or other evidence that you are in financial difficulties. Every employer or landlord will have their own criteria for success or failure. Similarly, employers might be happy to overlook a few late payments for a junior position but will apply much stricter standards to senior level vacancies.

Soft Searching

Every time you apply for a new credit agreement like a loan or a credit card, the application appears on your credit file, whether the application is accepted or declined. Making lots of applications in a short period can make it harder to get credit as lenders get the impression that you are desperate. The good news is that adverse credit checks are known as a “soft search”, which means they will not appear on your credit file in the same way and will not affect your overall credit score.

Looking at your credit score is easy, using one of the apps or websites run by Equifax, Experian, or TransUnion. If you think there is something wrong on your file, then you can ask to have it corrected. Keeping an eye on your credit score over time can also help you track whether the decisions you are making have a positive or negative effect on you score.

Even if you don’t spend long thinking about it, your credit score can have a huge impact on your everyday life. Every financial choice you make will be affected by your credit score, and if your credit score is low, then you may be unable to get some of the better deals around. Credit repair companies market themselves as the answer to your problems but what are they and how do they work?

A credit repair is a commercial business and will expect you to pay for their services. They say that they can help boost your credit score and advertise widely. Often, you will see adverts for credit repair agencies on websites aimed at helping people cope with debt or promoting financial advice. You may also hear credit repair companies being advertised on local radio or promoted on social media.

What Do Credit Repair Companies Do?

The most common service which credit repair companies offer is to check your credit files and getting any incorrect or inaccurate information taken off your record. They will approach each of the three of the UK’s largest credit agencies (Experian, Equifax, and TransUnion) on your behalf and request the data held about you. They will then check through the files and work out how to challenge any errors they find.

It is very difficult to come up with any hard facts about whether credit repair services work or not. There has never been any independent research done looking at customers’ starting credit scores, and how effective or ineffective the credit repair company was. It’s certainly true that if you have mistakes on your credit file which create a negative impression, removing them should improve your credit score. But this lack of hard evidence about the effectiveness of credit repair agencies makes it hard to work out whether you should use their services or not.

Is A Credit Repair Service Worth the Money?

Although credit repair companies may claim to have special expertise and know-how in rebuilding your credit score, the truth is that you can request your own credit reports and ask for errors to be corrected without paying a third party to do it for you. However, it’s also true that it can take a lot of emailing, making phone calls and sending letters to get errors corrected. Some people would prefer to have someone else take charge of the process and save them the hassle.

Credit Repair for People with Bad Credit History

We’ve explained how credit repair companies work by correcting wrong information or inaccuracies on your file. What credit repair companies cannot do is wipe information about missed payments, defaults, or County Court Judgements (CCJs) from your record, and you should be very sceptical of companies which say they can. If you know that your credit score is poor because you’ve defaulted in the past or taken out more credit than you can manage to pay back, then repairing past history is not a “quick-fix”.

The only way of repairing a poor track record which is down to poor money management in the past is to convince the credit referencing agencies that you’ve turned over a new leaf. Pay off old debts, show you can use credit responsibly, and make sure you are on the electoral roll. The good news is that even CCJs will drop off your credit file after six years, but the main point is that repairing your credit in these circumstances takes a while. It’s not instant as the credit repair agencies would make out. If your credit score is poor because of debts, seek advice from a debt charity rather than paying out more money to a credit repair company.