CREDIT SCORES ON THE DOORS...
HAS LOCKDOWN GOT YOU THINKING ABOUT YOUR FINANCIAL FUTURE? MAKE SURE YOU CAN TELL CREDIT SCORE FACT FROM FICTION, SAYS
MORE than a third (35%) of us have checked our credit score since lockdown started, as finances have become more squeezed. For one in 13 (7.5%) people, the pandemic has marked the first time they’ve ever checked their credit score, according to credit reference agency, TransUnion.
Some people said they had more time on their hands to check their score now, while others were concerned about the impact coronavirus is having on their finances, according to the survey.
For many people, keeping on top of how credit companies view them has been just one way they’ve been getting a stronger grip on their finances this year.
More than four in 10 (41%) have also set a budget to help them live within their means.
Nearly a fifth (19%) have turned over a new leaf by opening a savings account, while one in six (16%) have been shopping around for cheaper insurance providers.
However, despite these positive financial steps, TransUnion is urging more people to check, monitor and take control of their credit report and score and to understand its implications on their finances.
As Kelli Fielding from TransUnion explains: “It’s really positive to see more people checking their credit score for the first time, as taking control of your credit profile is an important step in protecting your financial standing, and understanding what finance you’ll be able to access should you need it.
“That’s particularly important at the moment, with our studies showing that a fifth of those (21%) that have been financially impacted by Covid-19 are looking to credit to help them manage the shortfall.
“However, the fact that around two-thirds haven’t checked their credit score during lockdown suggests there’s still a lack of understanding about the role that credit information plays; not only when it comes to accessing everyday finance like mobile phone contracts and overdrafts, but in achieving financial goals.
“Whilst bigger purchases may be on hold for now, it’s essential that you keep an eye on your credit report and score, so you’re aware of any changes and can take the right steps to minimise any impact during the pandemic.”
Here, TransUnion, which has produced an ebook to help people better understand their credit report and score, debunks some common myths around credit scores...
MYTH 1: There’s a credit ‘blacklist’
CREDIT reports are factual. Finance providers have their own policies when it comes to extending credit, and your credit information is just one factor when they make decisions.
MYTH 2: Credit reference agencies decide who gets credit
ONLY finance providers can decide which customers to offer credit to. Credit reference agencies just provide some information lenders use when making the decision, but each finance provider has its own individual lending policies.
MYTH 3: Being refused credit always damages your credit score
A FINANCE provider won’t tell credit reference agencies whether they’ve accepted or refused you credit. This doesn’t show on your credit report. But you should avoid making multiple credit applications in a short period of time, as this can have an impact. Lenders may get the impression that you are in desperate financial straits if you make many applications.
MYTH 4: Previous relationships always affect your credit score
SOMEONE else’s credit history may potentially affect your credit applications, which can happen when there has been a financial connection by having a joint agreement. If you had a financial association with a former partner or spouse but no longer share any joint accounts or financial connections, you can formally disassociate yourself so their financial behaviour cannot impact yours.
MYTH 5: Checking your credit score multiple times will damage it
NOT true. You can check your credit score as often as you like, with no impact on your score.
WHAT ABOUT THE PANDEMIC?
AS WELL as these tips, remember that if your lender has agreed to a temporary payment holiday on a loan, such as a mortgage, due to Covid-19, this shouldn’t have a negative impact on your credit score. But also bear in mind that credit scores aren’t the only paperwork lenders may look at when weighing up loan applications. They may already know some of your financial history, for example, if you’ve been a previous customer.