IF you’re applying for a mortgage, loan, card, overdraft or other form of credit, it’s worth looking at a copy of your credit report.
But you may be concerned that checking your score could have a negative impact.
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The good news is, this is not the case. Here we take a closer look.
What is a credit report?
Your credit file is like a kind of financial CV which shows lenders your financial history, and how good you are at repaying on time.
If you have a high score, lenders will view you as low risk, and will be more likely to offer you credit – and access to the top deals.
By contrast, with a low credit score, you will be viewed as financially unreliable and have access to fewer deals and less competitive rates.
You will also be at risk of getting rejected altogether.
Why do I need to check my credit report?
It’s important to check the information held on you is accurate and up-to-date.
If the details are incorrect or out-of-date, this could impact on your ability to borrow.
By getting into the habit of checking your file regularly, you will get a comprehensive picture of your creditworthiness.
Can this lower my score?
It is a misconception that checking your rating can lower it.
There are a number of things that can harm your score, like failing to make repayments on time (we explain more below), but checking your credit report is not one of them.
How can I check my rating?
You can check your credit score by contacting a credit reference agency.
The three main agencies are Equifax, Experian and TransUnion.
Each agency has their own scoring system, based on the information it holds.
With Experian, scores range from 0-999 and with TransUnion, scores range from 0-710.
Equifax recently rejigged its scoring system, and ratings now go from 0-1,000 (previously, users were scored out of 700).
While there’s no universal score, meaning you can’t compare your score between agencies, the key thing to remember is with each one, the higher your score, the better your rating.
You can get a free statutory credit report from each of the credit agencies and you’ll have to pay to view your whole file.
However, all three offer a 30-day free trial – remember to cancel before it ends though or your card will be charged.
It’s possible to get your score for free from third parties.
ClearScore uses data from Equifax to provide your score and report for free, while MoneySavingExpert.com uses data from Experian to provide your score and report for free, and TransUnion has linked up with CreditKarma.
What things can negatively impact on my score?
If you make lots of applications for credit in a short space of time, lots of ‘footprints’ will be left on your file each time a hard search is carried out – and this can damage your score.
If a lender sees lots of marks on your report, they could view you as desperate for credit, and this could result in them turning you down.
Before making a formal application, it’s worth making use of an eligibility calculator which will show your likelihood of getting accepted by carrying out a ‘soft search,’ without leaving a mark on your file.
Other things which can harm your credit score
- Missing a credit card or mortgage payment
- Maxing out on your credit limit
- Keeping hold of lots of credit cards you no longer use
- Withdrawing cash with your credit card
- County Court Judgements(CCJs) and Individual Voluntary Agreements (IVAs) and bankruptcy (all of which stay on your credit report for six years)
How can I boost my credit rating?
If your credit score is not quite up to scratch, it’s worth taking steps to build your rating.
This will put you in a better position to borrow further down the line.
Some actions will have a quick positive impact, while others will help you build your score over time.
- Reduce the amount you owe on credit cards and other debts
- Ensure you never miss any repayments. Setting up direct debits for credit card and utility bills can be a good way to make sure you never forget
- Get registered on the electoral roll. This helps lenders check your identity and address. It’s also a sign of stability
- Keep your credit card balance 25% under the limit
- Make more than the minimum repayment on your credit cards each month
- Close down any credit accounts you are no longer using
- Disassociate yourself from any financial ex-partners. A joint bank account with a former partner or joint household bills with old housemates creates a financial association on your credit report. By “un-linking” yourself, you can ensure their credit score does not harm your rating
Consider a ‘credit-builder card’
With this type of credit card, rates may be higher than on normal cards and credit limits may be lower.
But by making all repayments on time, and sticking within your credit limit, you can demonstrate that you’re a responsible borrower.
Over time, lenders are likely to look on you more favourably, meaning you eventually get access to lower rates and better offers.
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