By Jo Thornill For The Mail On Sunday Published: 17:00 EDT, 10 June 2017 | Updated: 03:09 EDT, 12 June 2017 Half of all borrowers app
Half of all borrowers applying for a mortgage, new credit card or loan have never checked their credit file or credit score. This is despite the fact that any issues in their credit history or mistakes recorded against their name could mean they are turned down for a loan.
Checking that a credit file is accurate – and boosting a personal credit score – are vital keys to smoothing the path to borrowing. The Mail on Sunday explains how to improve a credit score and correct errors held on a file to help ensure future borrowing is approved.
Money measure: Borrowers neglect to check their rating
1. Register on the electoral roll. This is the best way for lenders to accurately identify you and rule out fraudulent loan applications made in your name. It also boosts creditworthiness in the eyes of financial companies. It takes just five minutes to do at gov.uk/register-to-vote.
2. Use credit sensibly. Three main credit reference agencies – Experian, Callcredit and Equifax – record data on loan and utility payments made, or missed, by customers.
Their files are open to would-be lenders such as banks and credit card companies before they make a decision to lend. Some also provide a credit score, usually between zero and 999.
Consumers without a credit card or a loan often have a low credit score. This is because lenders need to see evidence of good debt management. Take out a credit card and make repayments on time to help build a good picture of your credit worthiness.
3. Keep your home phone. In the age of mobile phones many households have disposed of their landlines, but a home phone often signals financial stability, particularly if you have lived at the same address for a number of years.
4. Close old credit or bank accounts. If you have credit cards which you no longer use contact the provider and close them. If an account is still open – even if there is no balance on the card – lenders may think you already have access to more credit than you need as there will be a credit limit on the unused cards.
5. Resist applying for extra credit. If your credit score is low or you have had payment problems in the past do not apply for further cards or loans. A rejection for credit will show up like a red flag on your credit file and can affect your ability to borrow in the future.
Concentrate on clearing existing balances and making repayments on time to restore a score before making new credit applications.
Need a loan? Then take a look at your credit file first
Everyone has a legal right to see their credit file – going back up to six years.
It is wise to do this well before applying for a mortgage, or any type of credit or loan. This is so that any adverse data or mistakes can be corrected well in advance.
It can take up to a month to update. If a fraudulent application for credit has been made in your name, this will also be flagged.
Advice: Jacqueline Dewey says your credit file is like a passport
To obtain a credit history for free online, Experian – the largest agency – has a free Credit Matcher service. Noddle.co.uk (part of Callcredit) and Clearscore.com (which uses Equifax data) both offer data for free online.
Those without access to the internet can get their statutory credit file by post from Callcredit, Experian and Equifax for £2 each.
It is a good idea to check the information held with all three agencies as they may hold data from different financial providers.
Jacqueline Dewey, managing director at Noddle, says consumers should view their credit file like a financial passport. She says: ‘This is the data used to make important financial decisions which affect your life, such as a new mortgage, car loan or mobile phone contract. You want to be sure everything on there is correct and also that your file – and credit score – is in the best possible shape.’
Agencies also offer extra services, typically for a monthly fee of about £15, such as Equifax’s Credit Report and Score and Experian’s CreditExpert.
Noddle Alerts and Web Watch costs £30 a year. These types of service alert you when there are changes made to your credit file or searches are made in your name. Only sign up to the fee charging service if you understand what you are getting. Do not be lured in by a ‘free’ initial offer.
Any mistakes must be first pointed out with the bank or lender that gave the data to the credit reference agency.
If the financial provider agrees the information is incorrect – or if a credit application was made fraudulently in your name – this will be changed or removed within 28 days.
The agencies cannot remove data which the lender says is correct. But consumers may be able to add a ‘notice of correction’ for future lenders about a particular issue on their file. For example, that a mortgage payment was missed because of an unexpected redundancy.
THIS IS MONEY’S FIVE OF THE BEST CREDIT CARDS