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Understand Your Credit Score

Do you know how to access your credit score or the ways it can affect your access to finance of all kinds?

Whenever applying for a mortgage, credit card or loan, the provider will check your credit record. Along with basic information to confirm your name, date of birth and address, it provides detail on how you have conducted any financial dealings, any overdrafts, existing credit arrangements and whether they are up to date. County Court Judgements (CCJ’s), home repossessions, bankruptcies, debt relief orders and individual voluntary arrangements are also recorded1.

In essence, it is a snapshot of your financial past and present, but also acts to identify that you exist and where you live and is a crucial part of the assessment of your ability to qualify for personal finance of any kind.

Why might you need to be concerned?

When it comes to borrowing money, a poor credit score can mean an out-and-out rejection or having to pay a higher price than others because you may be considered a poor risk to the lender or product provider offering finance, according to Experian. In the past 10 years, the credit landscape has almost completely shifted towards ‘rate for risk’. This means almost every credit provider on the market uses your credit file to not only dictate whether they’ll provide you with credit but also what interest rate you’ll get2.

According to MoneySavingExpert, when it comes to loans, only a minimum of 51% of accepted customers get the rate advertised. A lender might be advertising a 6% rate (known as the representative APR), however, you could be accepted and offered a 40% interest rate instead, because of a poor credit score3.

So, if you are applying for a loan, mortgage, credit card or other types of credit, it makes sense to check your credit report first, particularly if you haven’t looked at it for some time.

Below are the main credit agencies’ websites from where you can get an up to date report on your credit status.

https://www.equifax.co.uk/Products/credit/statutory-report.html

https://www.experian.co.uk/consumer/statutory-report.html

https://www.transunionstatreport.co.uk/

Most importantly, it makes sense to check your credit report from time to time to make sure there are no mistakes or to make sure you haven’t missed any payments without realising it.

If in doubt, talk to an accredited financial adviser who can advise you and help you obtain what you need.

Sources

1 – Experian (2022) What is a credit score?. Available at https://www.experian.co.uk/consumer/experian-credit-score.html (Accessed 24th May 2022)

2 – Experian (2020) Why do people with higher credit scores get lower interest rates?. Available at: https://www.experian.com/blogs/ask-experian/why-do-people-with-higher-credit-scores-get-lower-interest-rates/ (Accessed 24th May 2022)

3 – Lewis, M. (2021) MoneySavingExpert: How to Borrow at 0%. Available at: https://www.moneysavingexpert.com/news/2021/11/how-to-borrow-at-0–i-e-no-cost–or-as-close-to-it-as-possible-/  (Accessed 24th May 2022)

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