It’s probably not something you’ve given much thought to but your credit record is one of the most important elements of your finances.
Failure to keep your credit report up to date might scupper your financial situation when you least expect it. Your credit score isn’t checked for every financial product, such as the thinkmoney Personal Account, but it is for others and it’s important you know what lenders can see.
What is a credit record?
Basically, if you want to take out a financial product such as a mobile phone contract, store card or mortgage, lenders will first do a ‘credit check’. This lets them see your borrowing history so they can make a decision on whether you will be able to make your repayments. Lenders can consult your credit file with at least one of the three main credit reference agencies - Experian, Equifax and Callcredit (but there are others). Whether or not they want you as a customer will depend on what it says in your file.
And that’s not all. A good credit score doesn’t just give you access to certain financial products, but it also dictates how much you can borrow and what interest you’ll be charged. For example, a poor credit score may mean you’re not offered the best credit card rate on the market.
If you have defaulted on a loan in the past, been declared bankrupt or have a CCJ, you could find there are many financial services providers who don’t want to lend to you because they think you pose too much of a risk.
However, sometimes the problem with your credit report is minimal and can be sorted easily.
What’s in my report?
Lots of things. You name and address, details of your financial links to other people, your credit accounts, information on any missed payments, whether you are on the electoral roll and a list of any searches on your file over the past year.
What can I do?
First of all, know that you can take control of your credit score. It’s sensible to review your credit report on a regular basis. If you find any mistakes, you can ask the credit reference agency to amend your file. You’ve a right to see your file under the Consumer Credit Act - you can check it online and it should only cost you £2. In addition to the three biggest agencies, there are others you can choose from – like www.noddle.co.uk, which is free to sign up with.
If you find you do have a poor credit score - because you have defaulted on payments in the past, for instance – it will not stay this way forever. Typically, defaulting on repayments will stay on your report for six years, and providing you take steps to manage your debts and improve your credit score, there’s no reason why you can’t achieve a positive credit report in the future.
I’m not exaggerating when I say it’s vital to make sure that all of your reports are accurate. The last time I checked my credit record with all of the main agencies, each report was different and none of them correct! It’s up to you to make sure everything is up to date.