This content originally appeared in the MSE weekly email on 24 June 2015.
We now live in a rate-for-risk world. The more creditworthy you are, the better deals you can get, whether it be mortgages, contract mobile phones, bank accounts, monthly car insurance or even how you pay for your energy bill.
So it's time to add 'manage my credit file' to your to-do list. To help, I've written my 35 Credit Score Boosting Tips, which anyone about to make a big application should read, but here are the top 15 that everyone should know...
1. You don't have a universal credit rating; there's no blacklist.
Each lender scores you differently and secretly to see if you meet its requirements as a profitable customer. Those whose history shows they're unlikely to repay at all are unlikely to be profitable, but good risks can be rejected too, if the lender thinks you won't make it money. Full info in Credit Scoring Debunked.
2. Boosting your credit score's like going on the pull.
There are lots of things you can try to do to make yourself more attractive to lenders, but there's no universal fix. Some people like a girl (or guy) in lots of make-up, some don't, and equally, different lenders are looking for different things. Yet below are some simple cosmetic changes that work for most:
- a) Evidence of stability's good. Put a landline, not mobile, on applications.
- b) Don't withdraw cash on credit cards. It's expensive and evidence of poor money management. See What About Withdrawing Cash Abroad?
- c) Never miss or be late on repayments. Use a direct debit to be sure, even if just for the minimum (then you can repay more on top).
- d) Check for address errors. An old technically active but unused mobile registered to your old address could even cause a mortgage rejection.
For full info on these and more, see Tips to Boost Your Credit Score.
3. Use a bizarre trick to (re)build your creditworthiness.
Credit scoring is all about trying to predict your future behaviour based on your past. So rejection's likely if your history makes you look a bad credit citizen. Yet equally, those who've never had credit get rejected due to a lack of data. After all, would you lend to someone you knew nothing about?
The bizarre solution is to get a credit card, just to do around £50 a month of normal spending on it (never withdraw cash), then repay IN FULL each month so there's no interest. Do this preferably by direct debit so you're never late. After six months to a year, you'll start to look a better credit citizen.
How do I get a credit card if I've poor credit? That's the catch-22. Yet specialist credit (re)build cards target this market. Use our Eligibility Calc to show which you're most likely to get. Here are the least-worst buys...
|Top pick credit (re)build cards|
|Card||Perks||Rep APR (1)|
|Aqua Advance*||£20 Amazon voucher after 2 mths||34.9%|
|Aqua Reward *||0.5% cashback on all spending||34.9%|
|Barclaycard Initial*||3mths 0% (try to avoid borrowing though)||34.9%|
|Capital One Classic*||3mths 0% (try to avoid borrowing though)||34.9%|
|(1) You won't pay this if you repay IN FULL each month unless you withdraw cash, which you should avoid. Full info in Credit Rebuild Cards. Official APR Examples|
If you can't get those, the last resort option is the Cashplus Creditbuilder prepaid card which costs £5/mth.
4. When did you last check your credit file? Get PAID to do it.
Even small errors on your files at the three credit reference agencies – Experian, Equifax and Callcredit – can kibosh applications. Check them all line by line at least once a year, plus before any big application, focusing on the one that the lender you're applying to uses.
You've a legal right to check them for £2, but there's a loophole which means right now you can get paid to check your credit files.
5. Get on the electoral roll.
If not, getting credit's tough, as it can cause ID and tracing issues. Don't worry about getting lots of junk mail though – you can opt out of the 'open register' element, which stops this but still means you count for credit scoring purposes.
For full info on how to check if you're on it, and what to do if you're not, see our Electoral Roll Help.
6. You need to know what they know about you.
Lenders assess you with three key pieces of info:
- (i) Your application form tells them your salary and more.
- (ii) Any past dealings you've had with them. So a lender you've banked with has more info on you – sometimes good, sometimes not.
- (iii) Your credit reference files, which include electoral roll info, products you have, court judgments and more. Regularly check for errors (see point 4).
As for whether they know your speeding points, criminal records and more, see our full list of What Credit Reference Agencies Know About You.
7. Avoid lots of applications in a short space of time.
Almost every card or loan application leaves a footprint on your credit file. Too many of these, especially in a short space of time, hurt future applications – meaning the system is anti-shopping around, as if you get rejected or are offered a worse rate than that advertised, you'll want to apply elsewhere.
So space out and prioritise applications. Eg, if you're due to apply for a mortgage, don't apply for minor things like cashback credit cards in the week before. Yet there's another solution too...
8. Find out for free what cards and loans you'll be accepted for.
Our Eligibility Calculators use a soft search (you see it on your file, but lenders don't, so there's no impact) to show your % odds of acceptance, so you can home in on the right card, minimising applications.
It can be hugely powerful, eg, Kelly said: "Used the balance transfer eligibility calc and got 35mths 0%, shifted £11,500 from up to 29.9% APR" – saving her £4,600 interest. Each of the links below shows your odds for almost all the top pick deals in each category (a few providers don't allow us to do it).
Many ask me at what percentage it's worth applying. That depends on how important that product is to you, eg, 60% means six in 10 people in your situation will be accepted – pretty decent odds. A story should help...
I recently sat with a MoneySaver whose focus was costly credit card debts and poor credit history. The calculator showed zero chance of getting any balance transfer except Halifax, which was just a 20% chance.
She asked: "Is there any point?" I explained 20% is better than nowt, and the worst that can happen is she wouldn't get it. She applied and got a 26mth 0% card with a £1,500 limit.
9. Ensure you time it right.
Major problems like CCJs, defaults or bankruptcy stay on your file for six years. Applications for products stay on for one year. So if they'll soon lapse, it can be better to wait before applying.
10. You don't need to pay to find your credit score.
I often get tweeted by people worried that "my Equifax credit score has dropped". These scores, which are sold to you by Experian and Equifax for up to £14.99/mth (and give you a score of up to 999), are just a loose indication of your risk profile, as each lender scores differently and uses far more info than just your credit file.
For a full assessment, read my What Experian or Equifax's Credit Score Really Means.
11. Get unfair defaults removed from your file.
If there's a default on your file that isn't fair (eg, you didn't pay a catalogue loan as it failed to deliver the goods), it's important to get it removed or it can kibosh most future applications.
12. Beware payday loans, they can kill mortgage applications.
They're dangerous in their own right, but some mortgage underwriters simply won't lend to anyone who's had one. See our free First-Time Buyers' or Remortgage Booklets for full help on mortgage acceptance. Related: Payday Loan Help
13. See if you're due £100s back from Experian's CreditExpert.
If you pay or have paid for Experian's £15/month credit monitoring service, we believe you may have been unfairly sold part of it. Our Credit Expert Reclaiming guide shows how to get the cash back.
We've been flooded with successes, eg, Dee:"I sent Experian the template letter and received a payment of £243.59."
14. Beware joint mortgages, loans and bank accounts.
It's not whether you kiss, live together, hold hands or are married that links credit files. It's simply whether you have a joint credit agreement (mortgages, loans, bank accounts and sometimes utility bills – joint credit cards don't exist).
This means their credit history can be looked at when assessing whether to lend to you. If theirs is bad, avoid any joint products. If you're now financially independent from an ex, see How to Delink Your Finances.
15. Be consistent, even on different applications, to avoid fraud scoring.
Fraud scoring is credit scoring's secret cousin. Among other things, these specialist agencies map how consistent your applications are, even to totally different firms. So be consistent if you've a couple of mobiles or job titles – use exactly the same one every time you apply. See full Fraud Scoring info.