Your credit score, or credit rating, is crucial because it can affect your ability to borrow money or access products such as credit cards or loans. It’s also vital to have a good credit score when applying for mortgages, and having a low score can stop you getting access to the best mortgage offers.
Does it cost money to know my credit score?
You can check your score for free and if it isn’t in the best shape, there are things you can do to improve it. There are some companies that have a monthly cost, but sometimes they can contain more comprehensive information.
What is a credit score?
Your credit score is created from information held in your credit report, also known as your credit file. The exact number of your credit score can differ between lenders or even between different products from the same lender, depending on the criteria used in assessing you as a potential customer.
There are three main credit scoring agencies in the UK: Equifax, Experian, TransUnion. They all use different scoring systems and all of the free credit score sites in the UK use one or more of these three sites as the basis for their information.
What is a good credit score?
Different lenders have their own standards for rating credit scores.
However, if you have a good score with one of the main credit reporting agencies, it’s more than likely you’ll have a good credit score with your lender.
A good credit score with:
- TransUnion is scoring 4 out of 5
- Equifax is scoring over 420 out of 700
- Experian is scoring over 880 out of 999
What is my credit score used for?
The information held on your credit file and your credit application form might be used to decide:
- whether to lend to you
- how much to let you borrow
- how much interest to charge you
Are lenders looking at the most recent information on my credit file?
The most recent information on your file will have the most impact, as lenders will be most interested in your current financial situation. That said, your financial decisions, good or bad, from the last six years, will still be on record.
If your credit report shows a few missed payments, you might be charged higher interest by lenders or might not be eligible for some loans as they will be worried that you’re a higher risk and so will protect themselves by excluding you.
How do I check my credit score?
You can register at one of the many companies that provide you with a credit score, there are a lot of free providers that will give you a lot of detail, such as Credit Karma or Clearscore. Otherwise, for a potentially more in-depth and thorough report, you may want to use Equifax, Experian or TransUnion. Some of these also provide you with advice on improving your score and what products you may be likely to obtain. It’s well worth signing up particularly if you feel you may have to repair your score before making a mortgage application.
Do I have a legal right to access my credit information?
You have the legal right to see a copy of your credit report for free.
You can request this from any credit reference agency that holds information on you.
What information is in a credit report?
In general, your file will include:
- name, address and date of birth
- some search footprints on your file, such as credit applications
- financial links to other people – for example, a joint loan or bank account
- any late/missed payments or defaults
- how much money you owe to lenders
- any County Court Judgments (CCJs) against you that are not paid in full within one month of receiving the notice
- if you’re on the electoral register at your current address
- if you have been declared bankrupt or entered an IVA (Individual Voluntary Arrangement)
What information won’t be included on my credit file?
It won’t include the following information:
- your salary
- student loans
- medical history
- criminal record
- council tax arrears
- parking or driving fines.
However, you will be asked for some of this information – salary, student loans – when making your mortgage application.
How long will it take to improve my credit score?
In general, credit history is built up slowly over time as you increase the number of on-time payments you make. If it’s been years of bad financial management that’s caused you to have a low credit score, it’s worth remembering that the issue won’t be fixed overnight. Your online credit score checker, whichever one you sign up for, will give you advice on how to fix your score. Keep following their advice and take positive steps every month until you get there.
How long does something remain on my credit file?
Most information, including the negatives, will remain on your file for at least six years. After that time, everything is deleted from your file, including missed payments, defaults, bankruptcy and CCJs.
How can I improve my credit rating and credit score?
If you have a low credit rating, there are several things you can do to start improving your score today:
- Register on the electoral roll: if your name’s not on there, you’ll find it much harder to get credit.
- Check for mistakes on your file: even having just a slightly wrong address can have an impact on your score. So, make sure you check all the details and report any incorrect information immediately.
- Pay your bills on time: paying a phone landline or internet contract before or on its due date, is a great way to prove to lenders that you’re capable of managing finances effectively.
- Check if you’re linked to another person: having a spouse, friend or family member’s credit rating linked to yours through a joint account could affect your personal rating if they have a poor score.
- Check for fraudulent activity: if something on your credit report is incorrect or doesn’t apply to you, i.e. if someone applied for credit in your name without your knowledge, contact the credit reference agency immediately to have your file updated.
- County Court Judgements (CCJs): receiving any court judgements for debt will have a serious impact on your credit score. If you’re having problems keeping up with payments, find free debt advice online.
- High levels of existing debt: ideally you should eliminate any outstanding debt before applying for new credit. This is because banks, building societies and credit card companies might be hesitant about lending you more if you already have a lot of existing debt.
- Moving home a lot: lenders feel more comfortable if they see evidence that you have lived at one address for a considerable period. Be sure to bear this in mind.
- Keep your credit utilisation low: Your credit utilisation is how much of your available credit limit you use. For example, if you have a credit limit of £2,000 and you’ve used £1,000 of that, your credit utilisation is 50%, so you’re using half of your credit limit. Usually, using less of your available credit will be seen positively by lenders, and will increase your credit score as a result. If possible, try and keep your credit utilisation at 25% or lower.
Is it worth getting a credit-building card?
If you have a poor credit history, you might want to consider a credit-builder credit card. These are cards designed for people with little credit history, or who have a bad credit history. The credit limits are often low and the interest rates high. This reflects the level of trust your credit file gives lenders.
By using these cards and paying off the bills each month, you can prove you’re creditworthy, increase your credit score and apply for other cards and loans when your credit rating improves.
Should I use a credit repair company?
You might see adverts from firms that claim to repair your credit rating. Most simply advise you on how to obtain your credit file and improve it – but you don’t need to pay for that, you can do it yourself. Some might claim that they can do things that – legally – they can’t. Instead, look at the tips contained within this article and follow the advice and guidance to fix your score yourself.
How do I report a mistake on my credit file?
If you do spot any mistakes, you can challenge them by reporting them to the credit reference agency. They have 28 days to remove the information or tell you why they don’t agree with you. During that time the ‘mistake’ will be marked as ‘disputed’ and lenders aren’t allowed to rely on it when assessing your credit rating.
What if I want to leave potential lenders a note on my credit file?
If there’s information on your file that’s accurate but doesn’t reflect your current situation – for example, you got into debt problems when you lost your job but you’re back in work now – you can add a ‘notice of correction’ to your credit report.
This is a statement of up to 200 words about what happened.
Can I repair my credit score after credit fraud?
If you’ve been a victim of identity impersonation or credit fraud, your credit score might have taken a hit. To improve your credit score after you’ve been a victim means taking many of the same steps contained within this article.
When you check your credit file, keep an eye out for a Cifas marker called a ‘Victim of impersonation’ notice. A CIFAS marker is put on your file by a lender who felt there had been an attempt at fraud using your identity. They are legally obliged to report this.
The marker will stay on your file for 13 months. Having a CIFAS marker doesn’t affect your credit score and doesn’t stop you from taking out credit. So, before you apply for a mortgage, take control of your credit score and make sure you present yourself in the best possible light to potential lenders.