A client asked me the other day “why is everyone always going on about credit reports?”

It’s a good question, as you can’t switch on the TV these days without seeing an advert for a credit report company. We certainly seem to be seeing a lot of ‘Data Dan and his Data Self’ at the moment, in adverts from Experian.

The answer to my client’s question was a simple one: a credit report tells anyone you’d like to borrow money from – like a bank or a credit card company – whether you are a good or bad risk.

In other words, it lets them know what state your finances are in and whether you are likely to keep up with your repayments.

Based on your financial history, you are given a credit score – the higher the score the more likely you are to get your loan, your credit card or your mortgage.

So although the Data Dan adverts are light-hearted, your credit report is very significant and your credit score really important and worth keeping an eye on.

Apparently, one in four credit scores is actually incorrect, so it is always worth checking and if you discover you have a really low score you should investigate, as it might not be right.

Certain things count against you when it comes to your credit score. For instance, if you’ve been declared bankrupt at any time that will have a big impact on your score or if you’ve missed payments on other loans or credit cards, this can lower your score too. Similarly, if you’ve owed money for a long time, that can have an adverse effect.

Credit scores are also influenced by your income and your spending – are you living within your means?

If you have a poor credit score, it isn’t necessarily the end of the world. Some lenders will still take you on, though the rates are likely to be higher, to reflect the greater risk they are taking in lending to you.

Instead, it is worth trying to mend your poor credit score and do this checklist to get you started:

 

• Make sure you are on the electoral roll – credit agencies check your identity and address
• Close any credit cards, store cards or mobile contracts you don’t use
• Avoid missing or making late payments, both on credit cards and on things like utility bills
• Take out a credit card and make sure you demonstrate a good payment history
• If you can’t get one of those, try a prepaid card which also improves your score a little
• Limit the number of credit applications you make – too many damages your credit score.

 

I help a lot of my clients to review and repair their credit score, so if you’d like a conversation on this topic or on any mortgage or insurance issue, please contact me on 07767 692653.