What is it? 

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Your credit score is a number out of 700, 999 or 1000 (depending on the agency). It simplifies how trustworthy you are as a credit risk, and therefore if other lenders would recommend you or not.

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What does it do?

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Your credit score will play a key role in allowing you to take ownership of your property or to buy a new one. 

A low credit score can significantly reduce the mortgage a lender is willing to offer you.

 

There are 3 Credit ratings agencies in the UK, they are Experian, Equifax and TransUnion. 

Companies like ClearScore, TotallyMoney, Conductiv, and Grow Credit simply repackage the information from one of these three agencies.

 

The agency I would recommend is called Checkmyfile, because it uses all three agencies to make sure you have all the information.

 

Get a free trial at Checkmyfile here

 

 

WORST THINGS ON A CREDIT FILE

 

1. Having no credit - It may seem ridiculous, but I applied to buy a house at 30. I was refused because I had no credit cards, no debts or overdrafts, just a £12.50 bill from T-Mobile I had missed when I moved house 3 years previously. My credit rating was 10 out of 999.

    

2. Missed payments - A missed payment on a credit agreement, including a mortgage, a loan, a hire-purchase agreement, etc, will drop you a few points. A default, where you have repeated missed payments, will drop you a hundred points or more.

    

3. Large debt - This will depend on your earnings, but if your debts (not including mortgages or long-term hire purchases) rise above 20 or 30% of your total income, a lender will take notice; above 80 or 90% and they will likely be scared away.

    

4. A County Court Judgement (CCJ), an Individual Voluntary Arrangement (IVA) or Debt Management Plan (DMP) do a lot of damage to your score, although all eventually expire.

 

 

BEST THINGS TO HAVE ON A CREDIT FILE

 

1. Being easy to find - Being at the same address, on the electoral register and with bills in your name.

    

2. Having multiple credit lines - Multiple overdraft facilities, several credit cards, credit lines with Amazon, Next, Marks and Spencer, etc. As long as you pay the bills on time, your credit score will rise.

    

3. Register Rental Payments - If you would like your rental payments registered, companies like CreditLadder, Canopy and Emma can set that up for you.

    

4. Identify any historic negative marks on your file and close them down, like that bloody £12.50 bill from T-Mobile. Most companies will accept immediate payment, some will find no records and you must ensure they remove the negative mark and confirm the removal in writing.

 

 

 

NOTES TO CONSIDER

 

1. You will likely be tied to your partner in many ways. If their credit drops, yours will usually drop as well by association. Severing joint accounts, bills with both your names on, and ultimately, registering the divorce and ending your joint mortgage is the only way to ensure you are disconnected.

    

2. Your credit score can be improved very quickly. When I was refused a mortgage it took me 2 months to go from a score of 10 to 920. All I did was pay T-Mobile, get 2 credit cards and use them once a month each, and register to vote.