More than half of us don't know our credit score, according to market researcher YouGov. Given that your credit rating can decide whether you are approved for a mortgage or loan, what interest rate you pay on your credit card and whether you can get your pick of current accounts, it's surprising so many of us have never looked at it.
The big three credit-rating agencies Experian, Equifax and TransUnion hold data on 50 million British adults. "These companies can see into our financial souls," says the Financial Times. "They can use our borrowing history including any past mistakes to predict how likely we are to repay in the future."
A bad credit rating can mean you are rejected from mainstream credit deals.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
So you won't be able to get those mortgages, loans and credit cards that you see in the best-buy tables. But it isn't as simple as having a good or a bad credit score: there are many categories between the two that can affect your finances. For example, have you ever applied for an interest-free credit card only to find you are accepted, but offered a shorter 0% period than advertised; or your credit card has a higher interest rate than was advertised? This is a sign that your credit rating isn't bad, but nor is it great. Lenders reserve their best deals for people with top credit scores.
If you've never checked your credit score because you've never been rejected, you could still improve your finances by taking a look and seeing what you can do to boost your score. Check your rating for free with ClearScore or by using checkmyfile.com's 30-day free trial. Make sure the information held on your report is accurate. If it isn't, contact the credit agency and ask it to make corrections.
Simple steps to take
This will improve your rating, as it shows you have roots at a particular address. Paying your bills on time obviously improves your score, so set up direct debits to ensure nothing gets missed. Make sure you are named on household bills, and have a bank account registered at your address.
Finally, don't assume that you have a good credit rating just because you've not taken out a loan before. "Lenders like to make informed decisions," says Vicky Shaw in the Daily Mirror. "If you have limited or no credit history, then lenders have insufficient financial information about past behaviour to use when making their decision." Consider taking out a credit card repaying your balance in full each month to boost your rating. Opt for a reward card and you can earn cashback, airmiles, or loyalty rewards while improving your credit score.
-
House prices rise 2.9% – will the recovery continue?House prices grew by 2.9% on an annual basis in September. Will Budget policies and ‘higher-for-longer’ rates dent the recovery?
-
Nvidia earnings: what to expectNvidia announces earnings after market close on 20 November. What should investors expect from the semiconductor giant?
