Archive: MoneySavingExpert's Money Tips Email

Martin: 'Sorry, but you're less attractive than you were (financially)... so protect & boost your credit score'
10 ways to ensure you get the best possible mortgage, card, loan & mobile deal as cost of living crisis bites

Inflation has taken its toll on many, leaving fiscal bags under the eyes, and making many less appealing to providers of credit cards, mobile phone contracts, mortgages, bank accounts and more. This is because spiralling prices mean many...

→ have less disposable income
→ that makes you less attractive to lenders
→ so acceptance, especially for top rates, is tougher
→ which adds to your costs... so rinse and repeat.

There's little we can do about rising interest, costs or poor product availability, yet you can manage your creditworthiness (if nowt else, check your credit file for free), which is crucial as many more people find themselves on the acceptance grey zone border.

So here are 10 need-to-knows to boost your creditworthiness, and my tips on how to be more fanciable (how you doin'):

1. You DON'T have a credit rating. In the UK there's no such thing as a definitive credit rating or score - no single number dictates whether a lender will accept you. Instead, each lender scores you based on its own wish list of what makes a profitable customer. Usually profitability correlates to risk, but there can be specialist lenders who view it differently.

Hold on geezer, I do have a credit score, I paid for it? Well, dude, [I'll stop that now], yes and no. The 'credit score' given by a credit reference agency is just a product sold that gives a useful loose indication of how a 'typical' lender may see things (see how to get paid to check your credit score).

Yet it's neither definitive nor used by lenders. I often hear: "My credit score's dropped seven points because I did x, y or z. Help." In reality, little changes mean very little (it's big drops to be wary of) as each lender is different, so don't stress 'em.

For example, close a credit card and your score may rise as you've less available credit, but some individual lenders may score you down, as they like signs of longevity. It's not hard and fast.

2. Your credit FILE matters. Check it for errors at least once a year, or before any big application. Credit reference agencies' files (also called a credit report) contain much of the data lenders use to assess applications. So check them regularly, preferably at all agencies, line by line.

A simple error, such as an unused - but still open - credit card account at the wrong address, can kibosh applications. Even if the file's correct, checking helps you spot problems. Full info in Free credit reports, and what to do if you find an error, but to briefly check...

- EXPERIAN (the biggest): Use MSE's free Credit Club
- EQUIFAX: Use Clearscore*
- TRANSUNION: Use Credit Karma

3. Need the best card or cheapest loan? DON'T just 'apply', that hits your file. Almost every credit application goes on your credit file. The system is effectively anti-shopping around, as get rejected or a worse rate than advertised, and you'll need to apply elsewhere, but too many applications, especially close together, is negative.

Eligibility checkers show your acceptance odds before you apply, so you can hopefully home in on where you've the best chance of getting a good deal. Some lenders have their own, but for ease, ours show a whole range of products at once (& sometimes can pre-approve)...

- Cheap loan eligibility calc (lowest cost personal loans)
- Balance transfer credit card eligibility (shift debt to 0%)
- Spending credit card eligibility (new 0% borrowing)
- Money transfer credit card eligibility (pays 0% cash into bank)
- Reward credit card eligibility (cashback, points etc)
- Travel credit card eligibility (cheap spending overseas)

Eligibility calc searches do go on your file, but only you can see them, lenders can't, so it doesn't impact your future creditworthiness.

Yeah, but I've had CCJs, I've got no chance... Try the eligibility calcs. Some specialist products do allow even those with past county court judgments (CCJs), defaults and bankruptcies to be accepted, though the deals aren't table-topping. For example...

For balance transfers, Virgin Money is 16mth 0%, 3% fee. For cheap overseas spending, there's 118 118 Money (always repay IN FULL or the interest's horrid). For rewards, Asda Money Select is 0.3% cashback, 1% at Asda (this isn't in our eligibility calc, but it has its own). Again, repay IN FULL or it's 34.9% rep APR.

4. The top cards to (re)build your creditworthiness. Credit scoring is a catch 22. As the quiz above shows, the two big reasons people get rejected are a) their history makes them look a bad credit citizen, and b) there's not enough data on them. In both cases, the best thing to do is get some borrowing and use it well.

In other words, you need credit to get credit, but how do you get credit when you don't have credit? Our Credit (re)Build Card Eligibility Calc lists easier-to-get cards designed for this, with high interest rates (no problem if you follow my instructions below). This includes Tesco's Foundation card*, as it also rewards spending (pay it in full or it's 29.9% rep APR). Once you have one...

- Do £50 to £100/mth of normal spending on it.
- Never withdraw cash on it.
- Repay IN FULL each month, preferably by direct debit. That way there's no interest (as if you clear the balance, you're not charged).
- After up to a year or so, provided you never miss a payment (and don't have issues elsewhere), your creditworthiness should improve.

More help and options in Credit (re)build cards.

5. A perfect credit history DOESN'T mean acceptance... as you also need to be able to afford to repay. Someone who's got a good history still won't get a £200,000 loan on a £10,000 income, as they fail the affordability score. These use your income from the application form (it isn't on credit files), your available credit, and either actual or assumed outgoings to assess you. For example...

- Credit history really counts for credit card acceptance. As with good history but poor affordability you'll likely still get a card, just with a low credit limit. See Cheap credit cards.

- Affordability really counts for loans. As you specify the amount to borrow, a good credit score but low affordability may lead to rejection, especially for bigger borrowing. See Cheap loans and Loans eligibility.

7. Use rent to boost your ability to get credit - which could help a mortgage application. Sadly, paying £1,000/mth rent doesn't help much to prove you can afford a £1,000/mth mortgage. Yet now at least, if you always pay rent on time, it may be able to improve your creditworthiness that can help mortgage acceptance. See rent on your credit file for full info, but in brief...

- Rental Exchange Initiative*. This is only for the Experian credit file. Here bigger private landlords (500+ properties), council and social housing landlords sign up. It's free for them and you. Their incentive is it helps encourage on-time rental payments.

- Canopy. Here the tenant signs up, and it's free to get it to report to Experian, or £4/mth for all three agencies.

- Credit Ladder. Another tenant sign-up, then you can choose which of Experian, Equifax or TransUnion it reports to for free, or get all three from £5/mth (if paying for a full year).

So if you use Canopy for Experian, you could then use Credit Ladder for one of the other two agencies, getting you 2/3 agencies free.

Related help: Get 25% first-time buyers' savings boost in a LISA | First-time buyers' mortgage booklet | 50+ tips for renters

8. Low eligibility score? Don't let it scare you off applying for important products like balance transfers. I often hear: "I didn't apply. I only got a 20% chance, and didn't want to risk a rejection". Yet if your best chance is 20% and it's a crucial product, like a top balance transfer to cut your debt costs, 20% means two in 10 in your situation WILL be accepted, and you may be one of those. As Adam emailed me recently:

"Hi Martin, thank you. I've been listening to your podcast for two weeks now and have already saved £3,728. First the Help to Save scheme...

"Then balance transfers. I applied to the top eligibility checker result, which I'd only 20% chance, and guess what? I was accepted and offered a £3,500 limit at 0% for two years. This debt was 20% APR. I can now focus on other debts, potentially having an extra £1,328ish over the 0% period to reduce the amount owed."

So if you're not sure, remember, one search on your file isn't that big a deal, and what's the point of managing and protecting your credit file if you can't use it for key products to cut your costs.

9. Get unfair defaults removed from your file. If there's a default on your file that isn't fair (eg, you were marked as paying late, even though you paid on time), it's important to get it removed - or it can kibosh most future applications.

It can be tough to get rid of, so see our step-by-step unfair defaults help. And even if it is fair, see how to mitigate the damage from defaults.

10. Technology is changing credit scoring and more is to come. More lenders, especially fin-tech ones, are also using Open Banking (you let them access your feed) to assess people. It can provide more up-to-date and bespoke insights that could increase (or decrease) your ability to borrow and mean less paperwork. Expect this trend to increase over the coming years.

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For far more help, see my 38 tips to boost your credit file guide.