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Your credit rating can affect your ability to get a mortgage. Have a read to find out how you can check or improve yours.
Last updated: 25 January 2022
A credit score shows how likely a typical lender would be to offer you credit.
When you apply for credit – such as a loan, credit card or mortgage – the lender tries to predict your future behaviour based on the way you’ve acted in the past. Credit scoring is fairly intuitive – just think whether you’d lend to someone with a history of not repaying?
To work it all out, lenders look at lots of different data. This may include how many applications you’ve made recently, how much you owe, what credit products you’ve had and whether you paid them all off on time. Some of this will come from their own information, but often they will also consult credit reference agencies Experian, Equifax or TransUnion, which hold much of this data on you.
These days, it’s worth checking your credit report at least once a month to make sure that the information it contains is correct and up to date.
With the rise in identity theft and millions of coronavirus-related payment holidays being processed, it’s a good idea to keep a frequent watch on the information being recorded in your credit report.
You can check the information each of the three main credit reference agencies (Equifax, Experian and TransUnion) have about you. You have the right to get your statutory credit report for free from these firms.
If you notice any mistakes, it’s important to get them rectified as soon as possible to ensure they aren’t dragging down your credit score unnecessarily and won’t have any adverse effect on future credit applications.
You can do this by contacting the company that provided the incorrect information or the credit reference agency itself, which will investigate on your behalf.
If you’re not on the electoral roll, you could find it very difficult to get credit.
The electoral roll is used to confirm that you live at the address given in your application – a key part of the identity checks that lenders have to carry out.
Experian, the largest credit reference agency in the UK, says registering to vote can boost your score by as much as 50 points. If you’re from Northern Ireland you can register online instantly Electoral role for Northern Ireland
Experian Boost is the name given to Experian’s free new tool, where you can give the credit reference agency permission to view the incomings and outgoings from your current accounts. At the moment, it only supports the big nine banks that had to sign up to open banking when it launched in 2018. These include Allied Irish Bank, Bank of Ireland, Barclays, Danske Bank, HSBC, Lloyds Banking Group, Nationwide, NatWest Group and Santander. Other banks may be added in future. By giving Experian permission to access your accounts (including joint accounts) via open banking, it will assess real-time banking information – none of which has been traditionally factored into credit scores. This includes your income and general spending, plus regular payments for council tax, savings and investments, and digital entertainment services.
Experian says scores could increase by up to 66 points and estimates that one in 10 users could go up an Experian credit score band.
Aim to use no more than 50% of your available credit, to show prospective lenders that you’re effectively managing your current budget – seeing this will make them more likely to offer you more credit.
Forgetting to pay bills can damage your credit score as it suggests to lenders that you struggle to manage your credit. This can be easily avoided, if you set up Direct Debits for your utilities and other bills, ensuring credit card payments are set up to make at least the minimum monthly payment.
If you opened a joint current account with an ex-partner whose credit rating is worse than yours, banks may also look at their credit rating when you apply for a product. If you’re no longer together, make sure you ask all credit reference agencies to break this financial link so their financial situation doesn’t affect you.
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