What does your credit file say about you?
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Most of us give the matter little thought, but these days, whether you are applying for a mortgage, a personal loan, or just a store card, you will be leaving what’s known as a ‘footprint’ on your credit file.
These footprints, which remain on your file for at least 12 months, will determine what rates you will be offered by future lenders. They could mean you are charged higher interest rates, or are turned down for a mortgage, or even struggle to find credit at all.
Strangely, a poor credit rating can be caused not by a bad track record in settling debts, but by having no debts at all. You may be a “model candidate for credit”, says Anne Ashworth in The Times, but a blank record raises doubts in the mind of a lender who would rather see evidence of your ability promptly to pay off debts than proof that you, “for some weird reason, are able to live within your means”.
To see your credit report – which only one in 20 have done – you simply need to contact a credit reference agency, such as Experian (0870-241 6212) or Equifax (0845-600 1772). The reports cost £2. Or you can download your report from Moneysupermarket.com and Moneyexpert.com.
As well as providing details of your borrowing history, credit reports will provide you with a credit score ranked up to 1,000. The average score is 763, the equivalent of a moderate risk for lenders. So if your rating is good, you are more likely to be accepted for the more competitive deals on the market, says Grainne Gilmore in The Times.
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To keep your record in good shape, says Sam Dunn in The Independent on Sunday, make sure you are on the electoral register, keep up monthly repayments on any outstanding debt and challenge any information you believe is wrong or misleading, requesting that it is deleted, or that a notice of correction is added to your file.
Lastly, remember that formal applications for credit will leave a footprint. While the banks argue that multiple credit applications made in a short time don’t always affect a credit score, Apacs (the electronic payments organisation) have produced an advice pack that specifically advises against making “multiple applications for credit in a short period”. Jill Stevens of Experian says alarm bells will ring with lenders if your record shows five or more searches within 12 months.
Many banks have stopped quoting typical rates and switched to a system called ‘personal pricing’ – an individual rate based on your credit history. So shopping for deals with these lenders will mean a credit search that could leave a stain on your record.
If you wish to avoid clock¬ing up footprints, insist that any checks with the reference agencies are recorded as a “quotation search” and not as a “credit application search”. The latter is recorded on your file; the former is not. Not all lenders offer this option though.
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