Credit

Your Credit score, what it is, why you should care and how to check it for free.

What is a Credit Score and how does it affect me?

Your Credit score is the digital fingerprint of your financial history.

It Includes, as a minimum the following:

  • Your Debt history
  • The amount of credit currently available to you
  • Your current and past addresses
  • If you are registered on the Electoral roll
  • How many Credit Cards you hold
  • How many outstanding loans you have
  • Any outstanding finance deals
  • Your repayment history
  • Recent applications for credit
  • The list goes on

It is an all-encompassing look at your finances.

If you are looking at obtaining credit any time in the future, it is something you must be aware of.

Your credit score is maintained by a Credit reference agency (CRA).

In the UK there are 3 which are listed below.

Your score is essentially a summary of all the information that the CRA holds about you.

This includes but is not limited to all of the information mentioned previously.

It is important to understand that your credit score is not just simply a number, it is a living thing which will move and change daily.

With that in mind, it needs to be worked upon and maintained as best as possible.

Simple things like using a comparison website to get multiple quotes for your car or home insurance can affect your score.

This is because it looks like you are applying for multiple lines of credit at the same time.

We know this may not be the case and in a short amount of time, your credit score will recover.

You may not even notice the drop but this just serves to show how temperamental a credit score can be.

confused

Why should I care?

Simply put, you may decide that you don’t.

The issue with this approach is that someday, whether it be applying for a mortgage or looking for a line of credit to finance a new car or home improvements, it is highly likely that you will have a credit check performed on you.

Even taking out a mobile phone contract is subject to a credit check.

It is important for you to understand why you need to monitor it and just like a small child or a pet, you need to nurse it and take care of it while it grows.

I will cover ways to improve your credit score in a later post.

UK Credit reference agencies

CRA's

As previously mentioned, there are 3 main credit reference agencies.

Below is the list of Credit agencies and ways you can view your credit report and score with each of them.

I have also included the current scoring criteria for each.

This is what potential lenders will see and therefore will give you a good indication of what deals you may/may not be able to obtain.

Equifax

Credit reference agency

Max score 700

0 – 279 = Very poor

280 – 379 = Poor

380 – 419 = Fair

420 – 465 = Good

466 – 700 = Very good

You can access your Equifax credit report and score for free using Clearscore.com or their App.

A full and comprehensive review on Clearscore and what they provide will follow but for now, know that you will receive an updated credit score once per month.

With Clearscore you are able to view your credit report whenever you wish.

This enables you to check all of your debts and details such as address and financial connections.

It is important that you take the time to check all of these details as any mistakes can have an adverse effect on your score.

Any mistakes will affect your chances of obtaining credit in the future.

Clearscore credit report

TransUnion (Formally Callcredit) 

CALLCREDIT

Max score – 710, rates from 1-5

1 = 0 – 550 = Very poor

2 = 551 – 565 = Poor

3 = 566 – 603 = Fair

4 = 604 – 627 = Good

5 = 628 – 710 = Excellent

Your TransUnion report can be viewed for free via TotallyMoney.com or their App.

One of the biggest advantages of Totally Money is that your credit score and report are updated daily, for free.

This enables you to keep a much better track of your credit, what is affecting your score and how it is changing in near real-time.

Check out my review of Totally Money here.

credit score

Experian

Max score = 999

0 – 560 = Very poor

561 – 720 = Poor

721 – 880 = Fair

881 – 960 = Good

961 – 999 = Excellent

You can register for the free Experian account which will show you your credit score once per month for free.

Alternatively, if you upgrade to Credit Expert, you will receive an updated credit report every day.

This will also include a more in-depth analysis of what exactly is affecting your score and how you can improve it.

It is also worth noting that you are ENTITLED to one FREE credit report from each Credit reference agency every year.

These are available from the Agency websites listed below:

Equifax

TransUnion

Experian

A few extras on your report

One point to note is that your credit report and score are generally 2-3 months in arrears.

If you have recently paid off a credit card or loan, or alternatively, take out a new line of credit then be aware that it may take some time before this is actually reflected on your report.

This is more important if you are taking out new forms of credit.

Ensure that you have given the report time to update and reflect this so you can see your score BEFORE you apply for anything else.

Too many applications for credit within a short amount of time is a sure-fire way to reduce your credit score.

The adverse effect of that being that any further credit you take out, be it loans or credit cards, will generally be at a higher APR.

Limit your applications and give your score enough time to settle after an application, that way you give yourself the best chance of getting a better APR, ultimately reducing your possible future debt.

Summary

In summary, your credit report and therefore your credit score is some of the most important information that anyone holds about you.

In relation to obtaining finance or credit in the future, it is arguably THE most important information.

There are ways to check them, some for free (as previously discussed) and some paid, the important thing is that you check them.

Use this to give you a basic understanding of your overall standing, this will enable you to make more educated financial decisions in the future.

Moving forward, we will look at ways to improve your score and the multitude of ways you can help improve it.

As always, thank you for your time and I hope you got some useful information out of this post.

Regards

Darren

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