A credit score is a measure of your credit-worthiness and is based from an analysis of your credit files. Despite popular misconception, your credit score is not a set figure but changes depending on the criteria a lender is scoring you against. As such, your credit score may be higher or lower depending on what information is held on file with a particular credit bureau.
A good credit score allows easier access to loans; bad credit may mean you are rejected for mortgage or credit card applications. Furthermore, a good score can mean lower interest rates and less punitive repayment schedules. It is therefore important to maintain good credit and to check your credit score often. Experts recommend checking your credit score once every twelve months.
Under the Consumer Credit Act, you have a statutory right to obtain your official credit files. This process is time consuming and costs £2 per agency. The alternative is to ask for more detailed information online from two of the main UK agencies.
Get your credit files
To apply for your official credit files, complete an application form, either from the internet or by downloading a hard copy and posting it to their address. Agencies require this information from you in order to send you your file. Applying online is the most convenient, but it can be a costly procedure as agencies try to sell you products that you may not need. Applying by post, you can write a letter listing your previous addresses and enclosing a cheque or postal order to the following agencies: Equifax, Experian and Call Credit. Because of the different information each credit bureau holds on you, your credit score may differ wildly between these three agencies.
Check your files
Once you have obtained your files, you have to check them thoroughly. You need to verify the accuracy of the information that banks and lending agencies are judging you against. Ensure that you check everything. Never assume that credit agencies have got the most accurate and up-to-date information on your history. First of all, ensure that your debts are correctly listed and that there are no inaccuracies on your repayment history.
Other important details are current and previous addresses as errors here may lead to you being judged based on someone else’s credit history. If you have ever had a joint bank account, loan or mortgage, ensure that these details are updated and accurate. Credit scores can be negatively impacted if your partner has not been keeping up with repayments. Are there any active or open accounts you haven’t used in awhile? These can also count against your score.
Correct any errors
The sheer volume of data that credit agencies deal with mean that chances are high there may be an error in your files. If you disagree with any of the information on your file, write to the applicable agency and request the error to be rectified. If the agency agrees with your correction, it will change your file quite quickly; however in some instances you may need to contact the company that originally provided the data. If your credit agency or bank refuses to amend the information held on file, you are entitled to add your own side of the story. Write your comments concisely and factually, and post this into the credit agency as a “Notice of Correction.” This will provide future lenders with a more balanced view of your credit worthiness.