Busting popular myths about your credit score
The cost-of-living crisis has led to millions of people taking a cold hard look at their finances, yet making ends meet is only part of the problem. Thousands complain to Resolver every year about their credit files and how credit scores work is one of the most common questions I am asked.
Most credit reference agency complaints are due to businesses that have placed ‘markers’ on the file, not the agency itself. The good news is sorting out a problem doesn’t have to be a nightmare.
There are many urban myths about your credit reference file, so I spoke to James Jones, Experian credit reference specialist and fellow TV expert to bust some of them.
THERE’S A BIG CREDIT BLACKLIST
There’s no such thing. Lenders base decisions on information on your credit report, your application form details and any account information they already have.
Even if things have gone a little awry in the past, you could still be accepted although you’re likely to be offered lower credit limits and higher interest rates. The biggest credit blockers are County Court Judgments, bankruptcy and Individual Voluntary Arrangements – and even they’re not forever.
THE PEOPLE YOU LIVE WITH CAN AFFECT YOUR CREDIT
Don’t blame your flatmate for not getting a credit card. Credit reports are individual, and only contain your personal information. Living with someone doesn’t mean your credit reports will be linked or have any impact on each other, unless you’ve applied for joint credit.
BEING IN A RELATIONSHIP LINKS YOUR FINANCES
Being in a relationship doesn’t mean your credit report, or finances, are linked. The only way to link credit reports is if you’ve applied for joint credit together in the past, for example for a bank account, loan or mortgage.
If you have previously taken out credit with someone, but don’t share any joint accounts now, you can ask for a financial disassociation with all the credit reference agencies.
However, joint accounts, investments and credit can leave you liable for debts as an individual if you fall out with your partner or get cleared out by the other person, so make sure you understand the repercussions before signing up.
PREVIOUS HOUSE OCCUPANTS AFFECT YOUR SCORE
This is a common myth, especially when people are living in rented accommodation. The previous occupants of your address do not have any impact on your finances or your credit report. There may still be letters that come to the address, so all you need to do is write on the front they don’t live there and stick them back in the post box.
HARD AND SOFT CHECKS
Checking your credit report doesn’t affect your score. It will show on your report as a ‘soft’ search each time you check, but this is only seen by you. You can check your report and score as often as you like, which is usually a good idea before you apply for credit.
‘Soft’ checks are often used by some businesses as a way to see if you might get credit. However, ‘hard’ checks, created by you applying for credit, stay on your file for up to 12 months and can have an impact on your score if you collect too many.
I HAVE ONE CREDIT SCORE
There is no universal credit score. Each of the three main credit reference agencies will give you a different score on a different scale.
Of course, the higher this is with each agency the better. Do keep an eye on these scores and, from time to time, the data in the reports used to calculate them.
■ It’s free to check your credit report so why not have a look? If you need help with a credit issue, contact resolver.co.uk