Credit score and credit ratings – your questions answered

Thinking about replacing your car or even buying a house in future? Then you might be thinking about how to improve your credit score once your DMP ends, so you can borrow again. And, these days, your credit score isn’t just about getting mortgages and credit cards, but mobile phones, bank accounts and more. Because of the importance of your credit history it’s no surprise our customers have lots of questions about it. To help you, we have answered a few of the common ones. creditscore-image

What’s the difference between a credit history, credit report and credit score?


Your credit history is a timeline of your financial history and tells the story of how you’ve handled credit in the past – any missed or late payments, defaults, CCJs and so on all show up on it.

Your credit history lasts 72 months (six years). Each and every month a new month is added to it, and an old month drops off. So if you were issued with a default 72 months ago, next month it will no longer be showing. Its worth saying that your DMP itself doesn’t show up on your credit history.

Your credit history also shows any credit you’ve applied for recently if the lender (or insurance provider, mobile company etc.) did a credit search.

Lenders, some utilities companies and other firms provide information to Equifax, Call Credit and Experian, who all hold your credit history. Not all lenders work with all three of the agencies, so your credit history may vary between the three of them.

Your credit history is private. You can check it any time you want (see below), but lenders and others can only check it with your permission – and usually this is when you apply for credit or another product. At this point they will tell you if they are going to check your credit history.

Your credit report is a summary of your credit history. Your credit report will also show details of your current and previous addresses, and any financial connections with other people you’ve got.

There’s no such things as single “credit score” for you. Each of the credit reference agencies work out a score for you and they all do it differently. For example, Clearscore use a rating out of 700, whereas Experian score out of 999.

If you apply for credit then the lender will also make a calculation based on your credit history and the information you’ve provided on the application form, to help them decide if they want to lend to you.


How can I check to see what the agencies hold about me?


These days you can check your credit history for free with each of the agencies. As we said, they all have different information so it is worth checking all of them.

Experian

Equifax (via Clearscore)

Call Credit (via Noddle)

You should check that the details they hold are correct – for example that they hold the correct address for you, that they accounts they list are right, and so on. If they are wrong, you can contact them to get them corrected.


Is there a credit blacklist?


This is a question that reappears every now and then. The theory is a mysterious lenders’ blacklist exists out there and if your name appears on it you can never get credit. This is NOT true.

Whenever you apply for credit each lender uses their own criteria. Having a poor credit score might hinder your ability to take out credit, but it does not make it impossible. Whilst some lenders will only lend to people with good credit scores, others specifically target people with less good scores. What is true is that if your score if less good you will usually pay more to borrow than somebody with a good credit score - who is seen as less of a risk.

As we’ve said your history is updated monthly, so even if you are rejected for credit one month you might be accepted a few weeks later.


How long will a Debt Management Plan (DMP) stay on my credit history?


Your DMP itself doesn’t show on your credit history. Any missed or late payments you had before you started your DMP will show, together with any accounts which you have received a default on and any CCJs. During your DMP, as you are making less than your contractual payment, this will show on your credit history. Providing that you maintain your DMP payments, some lenders may update your credit file to show that you are making your payments on time each month.

If you’ve been on your DMP for more than 72 months then any credit problems that you had before you started your DMP will no longer be showing on your history.


Could my address be on a credit blacklist or impact my credit history?


No – although a bit like the credit blacklist myth, lots of people seem to believe this. To be clear, your credit score is NOT impacted by people who lived at your address before you.

The only information on your credit report is that which relates to you.


Does a criminal record and fines affect your credit history?


Neither criminal records nor fines are included in your credit history.

Hopefully, you now understand the basics of your credit history. In next month’s newsletter we will look at how to improve it.

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