Your credit report & credit score and how to improve it

Have you ever applied for credit and been refused, then wondered why? Well your credit score plays a huge part in being accepted for credit.

What is a credit score? The credit score is a valuable tool used by lenders when assessing credit applications. It is made using the information on your credit report along with other contributing factors such as electoral roll information. Each lender will use a certain mathematical model to calculate individual scores. However each lender will use different methods and information to acquire the score meaning you may be refused credit by one lender yet accepted by another.

What is a credit report? There are 3 main credit reference agencies who all hold credit information about you. It’s important to regularly check your own credit file as sometimes errors can occur which then makes it difficult to get credit. The agencies are Experian, Equifax and trans union. There may be a small charge to request your credit file,

What is on my credit report? – The report contains all your credit history. Each time you apply for credit whether accepted or refused; a record is made. Payment information is also kept along with defaults, bankruptcies, etc. Previous address history, electoral information and anyone with financial links. Bank details, ongoing credit, utility providers and identifying information such as names, previous names and date of birth will all be on the reports. Fraud information and inaccuracies will also be recorded.

Who can see my credit report? When you apply for credit; be it a mobile phone, credit card, catalogue etc; the lender will search your credit report to see how you have managed your credit previously. Other people that can search your credit report include – banks, mortgage providers, utility companies, insurance, debt collection companies, government and potential employers and landlords.

What factors can affect my credit score? There are many factors that could negatively affect your credit score, thus meaning lenders are likely to refuse your application. These include –

Previous bad credit, late payments, defaults and bankruptcy being the obvious ones but there are other things too.

Having no credit history can also negatively affect your score. For instance if you’ve just turned 18 or perhaps been living abroad. Having no credit history makes it difficult for lenders to assess your reliability.

Not being on the electoral roll – Lenders will check to see if you are registered at the address you use for credit. If you have just moved into a new home it’s important to register to vote ASAP.

Too many credit searches/applications – Another thing that can affect your credit score is applying for too much credit. Each time you apply a search is registered on your report and too many can make it look a bit suspicious.

Financial links – Unfortunately it’s not just your credit information that counts. If you are in some way financially linked to someone with bad credit then this can affect yours too. This usually applies to married couples or people living at the same address. Also if the previous owners/tenants of a property have had bad credit this may have a temporary effect on the new owners too.

How can I improve my credit score? If you want lenders to say yes then there are a few things you can do to get your credit score that bit higher and improve your overall credit score.

Pay on time –Keep up with your regular payments, make sure they are in time each month. Late payments are recorded.

Pay off your debts in one go – Consider one large loan to pay off all your debts. There are several options and loans online. This will not only look good on your credit file with all your debts repaid but may also reduce your total repayments with one easy lump sum each month

Register to vote – Make sure you are registered to vote at your current address.

Unlink anyone you are not financially connected to – This includes ex partners, family members and those you may share dwellings with but no financial connections (I.e joint bank accounts, mortgages etc)

Check your credit reports – It’s important to check your reports regularly especially if you seem to get a lot of credit refusals. Report and amend any errors or out of date information.

Don’t apply too much – If you are desperate for a credit card it’s important you don’t do multiple applications. If you’re refused twice in one day then leave it a few weeks or months. Check your report, work out why, try to improve your score before you try again.

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