Everyone over the age of 18 in the UK has a credit score. This number represents of how appealing you might appear to potential lenders when applying for loans or a credit card or taking on a new contract for something like a mobile phone. A poor credit score will include anything that could put lenders off, such as a history of missed or late payments.
A Money CV
It often helps to think of a credit report as your financial CV. Applying for credit, whether a loan, overdraft, or mobile phone contract, is just like applying for a job. An employer wants to know about your work experience and qualifications, and a lender wants to know about your credit history through your credit report. A credit report sets out your money history over the past six years or so and provides information about whether:
- You have borrowed money in the past.
- How much you currently owe.
- If you have been paying back money on time.
Before applying for credit, or sending in your application for a new job which requires a credit check as part of the standard pre-employment checking, it’s wise to check your credit report yourself. This will minimise nasty surprises, just like you would update or proofread your CV and cover letter before sending a job application in.
Who Does Credit Checking?
There are three credit reference agencies in the UK which maintain your credit file. These are called Experian, Equifax, and TransUnion. All three do basically the same thing, and lenders will choose which one they want to work with. Although checking your file at just one credit agency is better than nothing, it’s advisable to check all of them. There is no charge for doing this, and lots of apps which can help you. The numerical credit score you see (ranging from 0 to 999, depending on the agency) is for your personal reference only, as lenders do not use the number itself. The credit score gives general information about your credit health, with a higher number indicating better creditworthiness.
What To Look for on a Credit Report and How to Improve Your Score
The main thing to check is the information recorded on your credit file. Make sure that personal details are accurate, and that you recognise all the accounts listed under your name. If you spot an error, ask the credit reference agency to fix it.
Improving your credit report and score takes time, especially if you’ve made past mistakes like missing payments. There are also several easy ways to improve your credit score, such as making sure you are registered to vote at your current address and avoiding making multiple credit applications. Higher credit scores often lead to lower interest rates, but other factors come into play as well. Each lender has their own rules about who they will lend to, so check out the sites which tell you whether you’re likely to be accepted before applying for a new credit card or mobile phone contract.