Credit Scores

What is your credit score?

Everytime you enter into some kind of contract with a company, you will leave a footprint on your credit record. This can include anything from applying for or getting a loan or mortgage, setting up a contract with a mobile phone company or arranging some kind of insurance.

It is this credit history of yours that a lender will check up on before offering you a mortgage, a credit card, store card or a loan. Your credit history will determine if the lender will offer you what you ask for and at what interest rate. Generally the better your credit score, the lower the interest rate will be.

Credit ratings are not universal. Everybody has one, but each lender will form a different judgement depending on their own criteria. So if you are refused by one company, it doesn't mean that all companies will refuse you.

The important thing about your credit score is that it is constantly changing and there are things you can actively do to change it for the better too. So even if you have a less than perfect credit history, it's not as debilitating as it sounds.

The credit scoring technique is primarily about highlighting and weighing up the profit and risk equation for lenders. Even someone with a good credit history may be refused credit, if it is unlikely to make the loans company enough money.

What isn't on my credit history?

Certain information is not included in your credit history. These include; your medical records, any fines you may have incurred and info from the CSA (Child Support Agency) is deemed as being unrelevant. Criminal records, student loans and saving accounts are not mentioned either.

What can affect my credit rating?

Commonly it is a default on a payment, arrears on mortgage and other bill payments and County Court Judgements (CCJ's) that will be highlighted on your credit history. Also if you have filed for bankruptcy, this will remain on file for a period of time.

How can you improve your credit score?

There are many ways to keep your credit history healthy. Such simple things as cancelling any unused credit and store cards, and using a landline phone number on an application.

The main way to improve and/or keep a good credit score is to pay your bills on time. Simple as that. This is why it is always sensible not to borrow more than you can reasonably afford. You should also space out any applications you make, otherwise your scoring could go down if they are too close together.

Even something as simple as being on the electoral roll can bump up your credit score. Just contact your local council on how to go about this. Most of the time it just involves completing a short form detailing your name, date of birth and address.

Check your credit report on an annual basis to ensure everything is correct and up to date. Mistakes can sometimes be made, which could affect you and your rating.

How can I check my credit score?

Amazingly there are only 2 main companies that end up supplying 99% of all credit history requests. They often charge an annual fee for this service but will offer a free 30 day trial, simply sign up and check your credit details for any discrepancies. If you don't wish to continue the service simply cancel before the 30 days is up and you won't be charged. You can always apply in writing or online and get a hard copy of your credit reference for just £2.

Checking your credit score won't affect you credit history but it will be noted. The 2 main companies who can supply your credit information are www.experian.co.uk and www.equifax.co.uk.

What am I looking for?

Scrutinize your credit report as it could highlight any problems you may have. This is always useful before applying for a loan, credit card or mortgage. It primarily ensures everything is correct, but it may highlight false information which could affect your credit score. You have the option of investigating any worries you may have via the company who provides your credit file.

Making changes to your credit file

You can change any mistakes on your record by contacting the credit agency. You are also entitled to attach what is know as a 'note of correction' onto your credit file. It should be correct as to the best of your knowledge and not longer than 200 words (so make it concise). This could be to report an illness, injury or job loss which would explain the circumstances surrounding any problems on your file.