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Managing your credit score.

Credit scores (also called credit ratings) help lenders make decisions. When you apply for a loan, mortgage or other credit, lenders don’t just look at the information you provide. They also ask one or more credit reference agencies to check your credit history. That helps them determine whether or not to provide the loan.

Here’s how your credit score is put together:

  • Your application form provides the foundation of everything else, so it’s vital you get it right.
  • Your history with the lender – they’ll consider any and all previous dealings with you.
  • Credit reference agencies provide information about your credit history on request. The main UK agencies are Callcredit, Equifax and Experian. They pull together information from the electoral roll and court records. They also examine the records of other lenders who have searched your file as the result of a credit application. They’ll look into addresses you’re linked to and any other people you have a financial association with.
  • Account information. Various organisations use credit reference agencies to share details about how you manage your finances. These include credit/store card providers, banks, energy suppliers and mobile phone operators.

Agencies will also normally report on payday loan activities, and whether there’s any record of fraudulent activity against your name.

Once all the information has been received, lenders allocate points according to their own systems and preferences. The total number of points is your credit score.

What are lenders looking for?

It’s not only about risk assessment. Naturally, lenders want to know if you’re likely to be able to repay any credit offered. However, they also want to know if you’re likely to be a good customer for them. So they’re looking for information about how you manage credit card repayments, for example. Or whether you’re likely to be a customer for the other products they have to offer.

How do I check my credit score?

While you can legally request information on your credit history form lenders, customers are unable to compile or calculate their credit score independently. This is carried out by Credit Reference Agencies (CRA’s), of which there are 3 in the UK: Experian, Equifax or Callcredit. CRA’s compile and hold your credit and employment history along with public records, including the electoral roll and court judgments.

It is important to note that the maximum scores differ for each agency. Equifax is scored from 700, Callcredit from 710 and Experian’s out of a maximum of 999. This is only due to the individual lenders, as not all report to all three agencies. This will not affect your overall credit rating.

Most agencies are free to use or have a free trial period; however, do be aware of ongoing monthly subscriptions or any paid add-ons after your free trials. There are also free for life credit reports available from Equifax (Clearscore) and Callcredit (Noddle).

How can I improve my credit score?

Credit scoring is based on past borrowing, but it is also wise to think about how you use credit now. Lenders want to know how you’re likely to behave, and they’ll get the best insights if they have both recent information (6-8 weeks) and historical information.

There are a few things you can do to improve your credit score:

  • Check your credit report. Make sure it’s all correct. It’s the key part of any credit score, so you need to sort out any mistakes as quickly as possible. Most credit reference agencies (CRA’s) offer a free trial period, during which you can check your file at no cost.
  • Use one or two credit/store cards responsibly to show lenders you can manage credit. Be named on your utility accounts. Electricity and phone bills count towards your credit, so the more you’re on which are paid regularly, the better.
  • Join the electoral roll to give credit reference agencies an easy way to verify who you are and boost your credit score. If you are difficult to track down, this can indicate some instability to lenders.
  • Limit your credit applications. Applying for credit cards and loans too frequently can suggest you’re a risky borrower and harm your credit score.
  • Ensure you make loan payments on time, as missed payments will reduce your credit score.
  • Eligibility checkers available through CRA’s can perform a “soft search” to show your likelihood of being accepted for credit without harming your credit score

What’s not in my credit history?

The following information doesn’t appear in your credit history:

  • Student loans started after 1998
  • Council tax arrears
  • Parking or driving fines
  • Who you're married to
  • Declined applications
  • Some types of default or missed payments
  • Reclaims for PPI, CPP or bank charges
  • Whether or not you've checked your credit file
  • Race, religion, ethnicity
  • Savings accounts
  • Medical history
  • Criminal record
  • Child Support Agency payments

Remember though, if a lender asks you about any of the above on an application form, you must answer truthfully. The lender will be able to check your responses.

What can affect my credit score?

Even if you don’t have a history of bad debt or missed payments, there are other factors which can negatively impact your credit score.

Lack of Financial History

While you may think this would be positive, no history means no evidence of your suitability. If a lender cannot prove you to be a responsible borrower, you may be declined. This can be problematic for those who have just arrived in the UK or for those just starting out.

Frequent Mover

If you move home on regularly, lenders can be sceptical of your financial stability as they may not be able to locate you if you miss payments on your loan.

Credit Report Errors

Any mistakes can seriously impact your credit score, even if you think they are trivial. Suspicious activity could be indicative of identity fraud or appear as an attempt to mask bad debts. You should aim to check your credit score annually and resolve any errors as quickly as possible.

Multiple Accounts

If you hold accounts with several banks or building societies, this can suggest you borrow more than you can manage. Try to close unnecessary accounts and consolidate all debts into an easy to manage, low-interest credit card with regular payments to boost your credit score.

Further details before applying for your loan

This should provide you with enough to get started on collating your credit report. For further details and more in-depth information, please visit Callcredit, Equifax and Experian directly.

If you feel you are ready to start your loan application, try our loan calculator to estimate your monthly payments.


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