MARTIN LEWIS
Rod has done it many times before and ALWAYS pays it back the next day, plus he buys you a pint to say thanks.
Jane has done this many times before and often forgets to pay the money back.
Freddy looks a nice person but you’ve never met him before.
My guess is you’d lend to it to Rod, but not the other two. Credit scoring works the same way – a good history of borrowing makes them think you’ll be a good borrower, a bad history or no history means they err on the side of caution.
The credit score you’re told about isn’t your credit score.
The three main credit reference agencies all offer you a credit score – based on different measures. Yet it’s just a loose view of what a typical lender may think. In reality every lender scores you differently based on its own definition of what is a profitable customer.
Credit files should be checked annually and before any big application.
You have a file at each of the three credit reference agencies, which details all your credit transactions, how well you repay and whether you’ve had any debts or county court judgements. These days there are ways to see all three files for free via the web.
Experian is available for free via my creditclub.com
Equifax is available for free via clearscore.com
TransUnion (formerly Callcredit) through noddle.co.uk
When you get the file, check it line by line for errors. I once did a TV money makeover for a woman looking to buy a house, and couldn’t work out why she’d been rejected for a mortgage. It turned out she had an old, technically active but unused mobile still registered to her old home. That was what put the kibosh on her application. 1. Paying rent on time can boost your credit score. Private renters and social housing tenants can opt in to a free scheme experian.co.uk/ rental-exchange so rent is now reported on your credit file and can thus boost your score if you pay on time. 2. Perversely, the best way to (re) build your credit worthiness is to get credit and use it properly. Get a special credit (re)build card from aquacard.co.uk or marbles.com cards, even though it’ll have a hideous 34.9% type APR. Spend £50-£100 a month on it (never withdraw cash) and ALWAYS REPAY IN FULL each month so you don’t pay the interest. 3. Spread out applications Multiple applications - especially in a short space of time - can damage your credit worthiness. 4. Ensure you’re on the electoral roll. If not it can cause ID and tracing issues. 5. Beware joint products if one of you has a bad history. If you have joint financial agreements mortgage, loan, bank account or even a utility bill - one of a couple’s poor history could impact the other’s. 6. Never miss or be late on repayments. Set up a direct debit to be sure it can’t be missed.