Is your credit score really that important?
You will probably have seen a range of adverts on the TV highlighting how important knowing our own credit score it – and the ability to receive them ‘Free for Life’ – take them with a pinch of salt, why? Simply put they are a marketing ploy to encourage you to source financial credit products, loans and credit cards though them for which they receive an introductory commission or to sign up for their enhanced services where you will be ‘shown’ how to improve your score.
For starters, a score of 600 from one provider means exactly the same as a score of 857 from another – because they use a different figure to measure it from, 700 or 1,000 in these examples, all it can give you is a flavour for how your finances (by their assessment) are fairing.
There are three principal Credit reference agencies, Experian, currently doing the rounds with the moody dog on the adverts, Equifax and Call Credit. The scores from all of them come free but it is only the latter one through their website, www.noddle.co.uk that will give you your Full Credit Report every month for free, and one I would recommend everybody sign up to. The others can charge between £7 and £15 per month just for the same information. Are they all the same? Broadly yes as they will capture most loans, credit cards, mortgages, mobile and utility contracts, occasionally something may be missed out but as lenders and credit providers use a combination of them all, a general idea of where you stand will help.
Do remember that 6 years of data is recorded so if you have had problems in the past they will not disappear from the report for a long time and can seriously dent your chances of getting the best credit solutions when you need them. Remember too, If you run a company, a poor personal credit file can often hold your company back as it looks to expand
Is improving your credit score a myth though? No it isn’t and here are some tips to do so.
- Don’t take out payday loans – they will bite you when trying to get conventional financial products for ages
- If your credit cards have high limits but very low balances consider asking for them to be reduced as having too much ‘available credit’ is viewed negatively
- If you have been a ‘rate tart’ in the past by moving balances around to get the best deals, close the unused cards afterwards for the same reason as the point above
- Try and pay off your credit card in full each month or if you don’t make sure you pay more than the minimum required
- If the provider offers to increase your limit, don’t take them up on it
- If you have had past credit challenges and have come to a financial arrangement with a creditor, get the arrears paid off otherwise you will constantly be moving the ‘bad news’ forward
- If you have a judgement against you, get it paid off AND recorded as satisfied, if you never pay your debts after losing in court, few, apart from the very expensive lenders will want to know you.
- Make sure you are recorded on the electoral roll, you may not want to vote, but being ‘anchored’ in the community helps a lot
- Don’t go hunting around for credit as each enquiry will leave a footprint on your file. Too many, and the later applications will fail. It is much better to get a professional adviser to make sure what you are applying for is likely to be available.
- Pay your bills on time – paying a mobile phone or gas bill just one day late will show as 1 month in arrears to anybody looking at your credit file
Finally as one of the fastest growing areas of crime relates to identity theft, a monthly review of your credit file can help you spot something that is wrong early on, and you can get it put right.