Credit boosting
The credit crunch means getting accepted for mortgage, loans, credit cards or even mobile phone contracts has got more difficult. Tonight our Money Saving Expert Martin Lewis reveals how to improve your chances of acceptability in a unique credit boosting clinic.
Lenders and other organisations have become more selective in who they want as customers during the economic downturn. Therefore, only those with decent credit histories are likely to be accepted.
So it’s vital to ensure your finances and other vital statistics are in tip-top shape before applying.
In the programme, we give three credit victims, who’ve had trouble getting financial products, a makeover to make them as attractive to companies as possible.
Each company scores you differently
There’s no such thing as a universal credit rating. Instead, each company tries to predict your behaviour using a credit scoring system. This takes into account your application form details, information from past dealings with you and data from the three main credit reference agencies: Experian, Equifax and Call Credit.
A company’s aim is to make money, which means they are trying to predict whether your behaviour is likely to yield them profit. Of course, those who have poor credit histories are unlikely to be accepted, yet even those with decent records can get rejected.
Fraud scoring counts too
Companies need to ensure you are who you say you are. That involves assessing your fraud files.
There are two main organisations that do this. The first is CIFAS, which simply keeps a record of any past fraud attempted on your identity. The other is National Hunter, a little known firm that assesses over 100,000 applications a day to try and spot discrepancies between current and past application forms. So it’s important to ensure you are consistent when you make credit applications.
Martin’s credit-boosting tips
Every lender scores differently, so there’s no perfect solution, yet some simple steps can make you look more attractive to most lenders.
• Get on the electoral roll. If you’re not on the electoral role you’re unlikely to get credit. Simple.
• Space out applications. Not just for credit but for car insurance, mobile phones and others, as all can leave a ‘footprint’ on your file. Too many in a short time can hurt.
• Build a good credit history/repair past problems. Always repay debts and pay all bills on time. If you’ve a poor credit history or can’t get credit because you have no credit history then apply for expensive credit cards. Spend a little on them each month, but always pay them off in full each month to avoid interest. After six months to a year this should start to build you a decent credit history.
• Marriage doesn't hurt, joint finances do. If you're 'financially linked' to someone on any product, then their credit history affects your chances of getting credit. Yet this doesn’t come from marrying someone, living with them, or even holding hands. It’s purely from having a joint bank account or mortgage. So avoid doing this with someone who has a bad credit history.
If you are no longer linked to someone (or your credit file says you’re linked to someone you shouldn’t be) then you can write and request delinking.
• Avoid the ‘rejection spiral'. If you’re rejected for a product, always check whether there’s an error or problem on your credit file before applying again. If not, and you continue to apply and get rejected elsewhere, then even if you fix the error, all the searches on your file from applying could mean more rejections in future.
• Cancel unused credit cards, debts and accounts. Access to too much credit, even if it isn't used, can be a problem. If you have an unused credit card, cancel it by contacting that firm. Simply cutting up the card is not enough.
• Check addresses on active account. It’s important to go through your credit file and ensure that any account listed as active (even if you don’t use it) is registered to the correct address.
• Amend errors. If you disagree with something on your file, and you can’t get the company to remove it, you have a write to add what’s called a ‘notice of correction’ to explain why you think it’s unfair. This will usually slow down applications as they’re then often manually processed, but it can help. You can also complain about disputes to the Financial Ombudsman Service www.financial-ombudsman.org.uk
For Martin’s full credit rating guide & tools to boost your credit score go to www.moneysavingexpert.com/creditrating
For FSA info & tools on your credit rating go to http://www.moneymadeclear.fsa.gov.uk/tools.aspx?Tool=debt_test
For This is Money info on credit ratings
http://www.thisismoney.co.uk/help-and-advice/advice-banks/article.html?in_advicepage_id=100&in_article_id=395436&in_page_id=90
How do I check my files?
Your credit history, as determined by one of the three main agencies, is vital so it’s important to ensure there are no errors. You need to contact the three agencies to check your file (links below).
You have a statutory right to get a snapshot credit report for £2. The three agencies also offer a premium service (with higher fees) to continue checking your file.
However, you can sneakily check your report for free by using the free trial periods offered by the agencies, but remembering to cancel before the free trial expires.
If there’s an error, write to the agency and request it's amended. Sometimes, you'll need to talk to the company that originally recorded the data.
You can also check what information the fraud agencies hold on you, though this is often less useful unless you think you may’ve been a victim of ID fraud or there’s an error on the file (companies should inform you if information from a fraud agency is part of the reason for rejection).
The following are the key agencies...
Credit Reference Agencies
• Equifax www.equifax.co.uk or write to Equifax Credit File Advice Centre, P.O. Box 1140, Bradford, BD1 5US
• Experian www.experian.co.uk or write to UK Headquarters, Experian, Talbot House, Talbot Street, Nottingham, NG80 1TH
• Call Credit www.callcredit.co.uk or write to Call Credit Limited, One Park Lane, Leeds, West Yorkshire, LS3 1EP
Fraud Checking Agencies
• National Hunter www.nhunter.co.uk
• CIFAS www.cifas.org.uk
John Charcol – Independent Mortgage Experts
For more information on how credit ratings can affect your mortgage application visit the John Charcol website: www.charcol.co.uk
