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Smartphone apps which allow you to check your credit score are now commonplace and free to use, and many of us use them regularly. But the apps and the credit score only gives a very broad indication on your credit file. The numbers on their own will give you an idea about which band you fall into, and tracked over time, can tell you if your credit situation is getting better or worse. But if you do suddenly see your credit score starting to dip, you then need to ask for access to your full credit file to understand what is going on. When you request your full file, you will be able to see the same information as the banks are seeing when they decide whether to lend to you or not.

Where is My Credit File?

Although any company which you have a financial relationship with will have information about you, this isn’t the same thing as your credit file. In the UK, there are three main agencies which work with the banks and other institutions to give them information about us and our credit history. These are:

• Experian
• Equifax
• TransUnion

Each credit referencing agency does things differently, and as such, the information which each one holds can be different. This also explains why you might see differences between your credit score if you check on two or more apps or websites.

Accessing Your Credit Report

Requests for your credit report has to be done through the Credit Referencing Agencies (CRAs) and you should be able to find a link on their websites to do it online. You may choose to access your report at just one of the agencies or all three; it’s up to you. Usually, they will ask you to create an account with their website to order a full credit report. There might be a charge for this, although many will offer a month’s free trial first. You will have to give the CRA enough information about you to allow them to identify you from anyone else with a similar name or date of birth. The CRA will also ask about any other names you have used in the past (such as a maiden surname) and any addresses where you have lived over the past six years. Once the CRA has accessed the information they have about you, it will be sent out by post, or email.

Does Checking My Report Affect My Score?

Asking one of the CRAs for access to your own credit report won’t affect your credit score. It is only when lenders search your file that your credit score may be affected. Applying for credit will show on your credit report and score, and making frequent applications over a short period of time may lower your score. There is another sort of check known as a soft search, generally carried out through an eligibility checker, or comparison site which instead of being a hard application, just gives you a general idea about what sort of products you might be eligible for, and what interest rates you might be able to access.

Inaccuracies on Your Credit Report

Once your credit report arrives, the next step is to go through it carefully. If there is information on there which is wrong, then you have the right to ask the CRA to have it corrected. This is called “raising a dispute”. If you find a mistake on one credit file, then request reports from the other two agencies too as errors may be duplicated. You will be asked to provide some sort of evidence to back your claim that the CRA has made a mistake.

The credit industry in the UK is massive with almost 500,000 store and credit cards and approximately 100,000 mortgages issued a month. Lenders must make a multitude of decisions of whom to lend or not daily. For all of this, they need credit data for all the applicants that are available in the form of credit history and scores.

Here is some of the important stuff you need to know about a credit score:

Understanding a credit score

It is a three-digit score allocated to individuals 18 and above in the UK and shows how creditworthy they are. All the credit-related information is gathered by three credit reference agencies in the UK viz. TransUnion, Equifax and Experian. Every lender has their method of credit score calculation with the data they get from the CRAs.

For an individual to know what their credit score is they can subscribe to any online service for a fee and get their latest credit score. Some services also offer this facility free of cost.

Calculation of a credit score

There is no definite format as to how the score is calculated. Neither the CRAs nor lenders share any information as to how they go about calculating the score. However, there are certain common factors they refer to in the credit score calculation process like:

• If the applicant has a permanent address at this they have lived for some time.
• Repayments and credit card payments on the due dates.
• The name is on the electoral roll.
• The kinds of loans the applicant has taken.
• If the individual applies for credit frequently?
• The length of the credit history of the applicant.
• If the applicant uses the loan facility or credit cards to its upper limits.

Good credit score

The credit scoring pattern differs between CRAs. The one common factor is having a good score is considered acceptable. Any individual whose credit score lies between 60 – 66% of the maximum will have a good score that is acceptable. E.g., Equifax calculates from 1000 with any score between 550 and 700 considered acceptable with a score above that range would be good and anything above 800 very good.

When does one qualify for a credit score?

Once an individual is 18 years they qualify for a credit card, mortgage, loan and any kind of credit agreement. Anyone younger will not be eligible for credit as legally they cannot be liable for payments thus making them ineligible for applying for any type of credit. Upon reaching 18 years of age and opening a credit line of any kind, CRAs and lenders begin calculating the score based on the credit history and activity of an individual.

Importance of a good credit score

Having a good credit score carries several advantages to it. An applicant with a good credit score will find it easier to get a mobile contract and a credit card or a mortgage with attractive interest rates and other perks. The best deals are available to only those with good credit scores.

Having a good credit history is vital to building a great credit score. For those individuals that do not have a credit history building it from scratch can prove a challenge. However, with time and patience it is possible to build a decent score in the following ways:

Get a bank account: For those that do not have one getting a stable bank account is the first step in building your credit history. Having a bank account helps in building a credit score by:

• Having a bank account for a long time shows financial stability to lenders.
• It helps in saving money and making payments via the bank that influences your credit score.
• It helps to serve as address proof verification.

Get on the electoral roll: Being registered on the local electoral register is beneficial in the following ways:

• It serves as identity proof and makes an applicant less risky to lend credit to.
• It shows that the applicant has a permanent address that indicates stability and increases the likelihood of having debts repaid.

Building credit history

While one cannot get credit without a good credit history one cannot have the latter if they have no credit-related transactions. It is a Catch-22 situation of sorts.

Some of the ways to resolve the issue include:

Explore getting an overdraft from your bank

Having an overdraft facility allows an account holder to borrow money from a bank. As it is credit, it reflects on the credit report. Certain current accounts have this facility by default, so check with your bank. If not, speak to the bank and ask them if they could offer this facility to you. Preferably avoid using an overdraft because of the high-interest rates. It is just to add build up the credit history.

Get your name on all your utility bills

Most utility bills payments made are reported to the three credit reference agencies (CRAs) operating in the UK i.e., Equifax, Experian, and TransUnion. These include broadband service providers, among other utility companies. For someone that is just starting to build their credit history having their names on these utility bills is a convenient way to build up their credit history. Ensure that the spellings of names and addresses are accurate on all of the bills as even a minor mistake could lead to mistakes featuring in the credit report.

Use the direct debit facility for payments

If there are recurring bills every month issues in your name they should be paid by the due date and in full. The easiest way to avoid losing track of monthly payments is to set up an auto-debit facility every month. The money will automatically get deducted on the due date and this will show up like regular and timely payments in the credit history that will help to boost your credit score. The only thing to ensure is there is ample money for the payments in the account every month.

Try to get a credit builder product

Certain products help build up credit history without the need for a credit check. They do charge a monthly fee but if you can afford it, they will help to build your creditworthiness over time.

Without realising many individuals unwittingly hurt their credit scores through incorrect financial decisions.

While these may seem trivial and are soon forgotten these sometimes later pop up as part of the credit history and hurt the score.

Just a few of the ways that people can end up adversely affecting their credit score are:

Loan payments made after the due date

While only some avoid repaying unsecured debts, many defer payments until later, thus skipping the due date. It may seem okay at that time but missing the payment on the due date has serious consequences as they reflect in an applicant’s credit history that might become a cause for the lender refusing to give credit.

Defaulting on mobile repayments

Getting the latest mobile phone is something most people get excited about. The one thing that most buyers do not realise is that the mobile contract signed is a credit agreement. The handset is included in the contract that is paid for as per the terms and is part of the Consumer Credit Act. Missing or defaulting on a mobile phone contract will directly impact the credit score negatively.

Skipping credit card payments

With almost 70 million credit cards circulating in the UK, these are a very popular way of making purchases. However, missing out on any of the minimum repayments can have a severe impact on the credit score. A lender will assume that an applicant skipping minimum repayments is a high-risk individual and not safe to lend any credit to.

Payday loans

Millions of people across the UK opt for Payday loans that are short-term but carry high-interest rates. This does a lot of damage to their credit profiles in the long run even if they make repayments on time. Any lender that finds Payday loans taken frequently by an applicant will baulk at lending as they would consider the applicant to be unable to manage their finances. As far as possible it is best to avoid taking these kinds of loans unless necessary and unavoidable.

Multiple loans or credit cards

Some people like to own multiple credit cards or take out multiple loans and also do make their repayments on time. However, the disadvantage of these is that prospective lenders will assume that the applicant’s financial status is shaky and this may prevent them from giving credit.

Not registered

One of the most important things that lenders look at closely is the identity of the individual and the address they live at. They get this information from the applicant’s details on the electoral roll of his borough. If you are not on the voting list of your area it is unlikely, they will consider issuing any credit.

Not having an adequate credit history

While the general belief is not taking credit is a good thing it can backfire when you do apply for credit. Lack of adequate credit history with the credit reference agencies can also impact your credit score.

Did you know there are approximately 7 million card and loan applications that are rejected by companies and lenders? Most of these rejections are due to the applicants having low credit scores that make them a high risk to lend to.
If your score is on the lower side, these are a few ways to increase your credit score:

Make sure you are on the electoral roll

If you are not o the voter’s list in your area ensure that you register at your current address. Lenders first check this when an applicant applies for a loan or credit card. If your name and address are not listed the credit score will dip. Check with your local council if you are registered or not. If not then sign up asap using the online facility.

Be punctual with repayments

Whether it is your credit card bill or a mortgage you must be punctual with your repayments. Repaying on time will create a positive credit history as lenders appreciate individuals that are prompt in repayments. Those with mortgages and prompt in repayments of their premiums have it increase their credit score. Tenants can also choose to register so that their rental payments can further help to boost their credit ratings.

Open a savings account with a credit-builder

A good way to boost your credit score is to open an account with any of the credit builder apps or accounts like Pave, Bits etc. Saving a small sum every month reflects well to lenders that you are careful with handling your finances. You could set up a direct debit from your bank for a small sum that will add up within a year.

Consolidate accounts

If you have any accounts that are seldom used consider consolidating them to limit your lending to a few accounts that are well maintained that will reflect positively on your credit history and score. Accounts that are rarely used may lower the credit score because credit reference agencies evaluate the cumulative credit limit for score calculation. Also, when spending, do not use up the credit card limit and maintain a balance within limits.

Keep track of your credit history

This is easy to do but surprisingly many people overlook checking their credit history at regular intervals. It is always possible that a company or lender can make a mistake leading to inaccurate information appearing on your file. This will result in it negatively impacting the credit score. If you do notice any errors report them to the concerned lender at the earliest for it to be removed. Checking your score will not impact it as it shows up as a soft search and is only visible to the account holder. There are several ways to conduct a free credit score check online.

If you are a joint account holder with an individual their credit history also can impact your credit score if they have poor credit ratings. If there is a joint account not in use it is best to close it.

If you are planning on renting a property and are concerned about clearing your credit check read on:

Firstly, the landlord/letting agent must get the consent of an applicant to gain access to their credit file. The checks will be done by any of the 3 credit reference agencies (CRAs). The UK has TransUnion, Equifax and Experian. For the credit check, the payment is done by the entity requesting the check, not the potential tenant.

Credit Report Details

There will be different sections in the report with the prominent ones shared below responsible for clearing or failing the credit check.

• Voters/Electoral roll: This section shows if the applicant is enrolled in the electoral rolls where they lived. It is legally binding for everyone to be registered with their area’s local electoral roll. If unsure before applying for a credit check with the Electoral Registration Office of your area. Not being on the voter’s list may impact the credit check negatively with the application getting rejected.
• CCJs (County Court Judgement) letter: They form an integral part of the credit check. If an individual is issued a CCJ and there are unpaid debts it will go against the applicant. If there are any doubts about having a CCJ (before applying) contact any of the CRAs for a copy of the credit report.
• Adverse credit: It is found in the credit history of individuals that have had issues with repayment of debts. Defaults, not paying the full sum or late payments form part of having an adverse credit history.
• Affordability: One of the purposes of conducting a credit check is to confirm if the tenant can pay the rent. For this, the expenditure and income are evaluated to determine if they can afford the rent.

Not clearing a credit check

If you are not able to pass the credit check that is okay! There still is a way to get a property on rent through a guarantor as an intermediary.

Tips to ensure passing a credit check:

• Make sure that all payments are on time and up to date.
• Go through your credit report to ensure all info is accurate.
• Ensure you are on the voter’s roll in the area you stay.
• Always sign a tenancy agreement with the property’s landlord where you live currently.

Some of the other aspects a landlord/letting agent will examine during the credit check are:

Get a referral letter from your company/employer stating your designation and monthly salary. An added asset would be a letter of recommendation from your employer.

If you are on a work permit in the UK it might influence your ability to rent a property. However, getting a recommendation letter from your previous landlord could stand you in good stead.

Before you have a credit check carried out as a tenant it is best to ensure that you cross your T’s and dot your I’s before the check is carried out. However, even if you do not clear the credit check you could always use a guarantor as an intermediary.

Have you ever thought about how credit reports are created and why someone may not have a credit score? Not having a credit score can be very inconvenient especially if there is a need for credit. However, for someone without a credit history, it is an opportunity to build one.

Credit history and score

A credit score is calculated as per the information available from an individual’s credit information on their report. It tends to differ from one CRA (credit referencing agency) to another. The higher the score the better are the chances of getting credit from banks and companies.

Although having a high credit score does not always guarantee that all lenders will instantly issue credit. Some lenders look at the detailed information on the credit report first including past transactions apart from other criteria. They also may have their system of calculating the credit score.

Understanding a Credit Report and Score

There are either of these two reasons for not having a credit score:

• Lack of credit history
• The credit history is very old

Looking at both in detail: For an individual to maintain a credit score, there is the need for a credit report. Likewise having a credit history is vital for a credit report. An individual’s credit history contains the credit data submitted by any of the three CRAs (credit reference agencies) in the UK. Those that have not applied for credit in the country will not have any history, leading to no credit report or score.

For an individual in the UK without a credit history, the reasons are as follows:

Recently moved to the UK

If an individual is new to the country, their earlier credit details cannot be transferred from their country of origin to another country. Despite an individual having a very good credit report and score in their own country, they will have to start from scratch to build their credit history in the UK. Generally, it can take from 6 months upwards for the first credit report to be generated.

Never used credit

There may be some individuals that have not needed to use credit ever or because they are very young. In the case of paying bills in partnership, the name may not appear on bills. Likewise having a mobile contract in someone’s else’s name will not appear on a credit report.

Less than 18 years

For individuals that are below 18 years of age CRAs do not share credit information. Lenders are also unlikely to give credit to those below the legal age because in case of unpaid dues they cannot be taken to court.

Very old credit history

An individual might have had accounts in the UK in the past. However, there was no activity seen on them for a couple of years. In case of closure of accounts, they feature on a credit report for 6 years but after that are no longer seen in the credit history. If you have closed all your earlier accounts and not created any new ones for many years it will lead to not having a credit score. It mostly happens to expatriates that leave the UK for an extended period to live and work in another country.

In very basic terms, your credit score is a number, ranging between 0 and 999. It is an indication of how reliable you have been in the past when paying back money you have borrowed from a bank or on something like a credit card. If your credit score is high, then you stand a good chance of being approved if you are thinking of moving house and taking out a new mortgage or applying for finance for a new kitchen or large item of furniture. On the other hand, a low credit score can mean your options are limited.

Credit scores are generated by the major credit reference agencies, using what they already know about your financial history. You can get access to this information too. When you fill in an application to borrow money, the bank will look at your credit score when deciding if you’re likely to pay it back or not. Your credit score may also affect how much money the bank or other financial institution will be prepared to lend you.

Factors Impacting Your Credit Score

Your credit score is like your financial CV. If you’ve never missed a payment on a credit card and never defaulted on a loan, then this will affect your credit score in a positive way. If you have a chequered financial past, with defaults or County Court Judgements (CCJs), then this will make your credit score lower.

People who have never borrowed money and never had a credit card might find that their score is low, purely because there is no track record of them being able to borrow money and pay it back regularly.

Credit scores are calculated by looking at the different factors on your credit file. This is information recorded in a digital database, which will show all of your credit agreements such as mortgage, personal loan or credit cards. This includes finance you have taken out with someone else. The database will also show payments and will highlight any missed payments over the last six years. The score also looks at public records, mainly the electoral roll and the list of CCJs. Your credit file contains purely borrowing information, and nothing about your job, salary, spending habits or medical information.

Who Holds This Information About Me?

Banks and other lenders don’t have their own information about you, apart from any accounts you have with them. All lenders use one of the main UK credit reference agencies to help them make a decision. The three main agencies in the UK are Equifax, Experian, and TransUnion. They provide the information about you but don’t make decisions or provide recommendations to the lender. Individuals have the right to request to see the information which any of the credit referencing agencies have about them. If you come across a mistake on your record, then you have the right to ask the credit referencing agency to correct it.

What Can I Do to Influence My Score?

If you have found that you are struggling to get finance and think your credit record might be to blame, then there is lots you can do to get the numbers upwards. Firstly, get your finances in order and pay off any outstanding sums, making a plan not to get behind on payments again. Check you are listed on the electoral roll and request your credit file to make sure there are no obvious mistakes listed. If lack of a track record is the problem, think about taking out a credit card with a small limit, and paying it off in full every month.

If you are applying for credit, there’s usually a form to fill in. Lenders will look at this information when they are deciding whether or not to lend you money, so it’s important to take your time and give them the best first impression possible, without lying of course. Many banks and building societies use not only credit scoring agencies but fraud agencies too, which use software to pick up discrepancies on forms which could indicate identity theft or fraud. Check the form over for typos – have you included your postcode and given your annual not monthly salary, for example?

It’s a common misconception that the bank knows everything about us and can see the details of every account we have but this isn’t really the case. If you are applying for a loan or credit card with a specific lender, they will be able to access:

• Your track record with that lender – they will be able to access their own account data about you, showing if you have made payments on time in the past.
• Fraud information – companies in the financial services industry share information between themselves about customers making fraudulent applications.

Credit Referencing Agencies

The three big credit reference agencies in the UK are Experian Equifax, and TransUnion. All lenders will use at least one, possibly more than one. Agencies compile information from the electoral roll, and will look at court records to see who has been declared bankrupt or been given judgements against them.

Agencies can also access data from other lenders, showing whether you have applied for credit through other lenders, and showing who you might be linked to financially through having a joint account, for example. They also have information from gas and electricity bill, so being in arrears with your energy provider could go against you too. Credit referencing is a huge factor in whether you will be successful when applying for the loan or not. Credit referencing agencies just collate the information given to them and pass it on to the lenders; they don’t make decisions. Agencies handle a huge volume of information and sometimes get things wrong. If you’ve been turned down and can’t understand why, the first step is to request your file from the agency to check it over for any mistakes.

What Lenders Don’t Know About You

There are lots of myths around about what sort of information is actually on your credit file. It’s important to bear in mind that your credit file is purely your financial history and nothing more. Despite the conspiracy theories which you might hear or read about online, credit referencing agencies and lenders do not know:

• Your religion, race or ethnic background – because these facts about you are not recorded on your credit file.
• How much you earn – credit agencies don’t have access to HMRC, and can’t see how much you’re earning or paying in tax. You might be asked to state your salary on an application form though, especially for a mortgage or similar.
• Savings – although a financial product, details about money you hold in savings accounts won’t appear on a credit referencing report because you’re not borrowing anything. If you do apply for a new savings account, there will still be checks done to establish your identity to comply with money laundering law.
• Medical information – credit referencing agencies won’t have any access to your medical records, or details of any tests you are waiting to have.
• Criminal records – no credit referencing agency will have any information about any crimes you have committed in the past, unless of course, those crimes involved making fraudulent insurance claims or identity theft to apply for credit cards in someone else’s name.