WE ALL have one, but what exactly makes up a credit score and how can you improve it?
More than a quarter of credit applicants have been turned down over the past year, according to price comparison site Moneysupermarket.com, with London having the highest rejection rate.
Scores of expats who returned to London due to the global downturn are among those having the toughest time.
“People returning from working overseas can often run into problems when trying to do something as simple as taking out a mobile phone contract or credit card because there’s no recent evidence of a credit history here,” says Lucy Davies, a spokeswoman for CreditExpert.co.uk, the credit monitoring service from Experian.
“This can be frustrating, especially if you have a good salary. Unfortunately, evidence of salary sometimes isn’t enough.”
The situation is just as difficult for foreigners who come to the UK. Neil Munroe, external affairs director at Equifax, another credit reference agency, says: “Credit information held about individuals in other countries is difficult to access and interpret from the UK due to differences in language and the data held.”
Your credit score is a figure between 0 and 999 – the higher the better. Follow our ten-step guide to improving yours:
1. CHECK YOUR FILE
Credit reference agencies don’t hold secret information about you: you can request to see what (if anything) is held.
You can access a basic credit report with the three main agencies, Experian, Equifax and Callcredit, for just £2. For more detailed reports, you need a subscription. It costs £12 a quarter with Callcredit, £6.99 a month with Equifax and £14.99 a month with Experian.
However, you can take advantage of a free 30-day trial by signing up, checking your report then cancelling before you’re charged. The Callcredit service, however, takes the first payment when you register.
2. RECTIFY MISTAKES
Mistakes by lenders can happen, and you can challenge these. Contact the lender in question. It will update its records and notify the credit reference agencies.
3. CLOSE OLD ACCOUNTS
The more credit you have available to you, the higher the risk you are. You might have cut up that old credit card long ago, but if you haven’t closed the account it will still appear on your file. Get in touch with lenders to close unused facilities.
4. REGISTER TO VOTE
If you aren’t registered to vote, speak to your local authority to get onto the electoral roll. For many lenders, this is a pre-requisite to lending.
5. EXPLAIN YOURSELF
If there are special circumstances surrounding past credit problems, explain this by adding a ‘notice of correction’ to your credit report. For example, you may have missed several payments because you lost your job.
6. DISASSOCIATE YOURSELF
If you have financial links to people on your credit report which are no longer correct, you should ask for them to be removed.
For example, you might have separated from your partner, but they might still show on your report.
7. BRING RECORDS
Foreign nationals coming to Britain should make sure they bring a credit file from their previous country, as well as prior credit contracts, rental agreements and utility bills.
8. BUILD A HISTORY
There are some credit cards on the market aimed at people with little or no recent credit history.
These tend to carry higher interest rates, but if you pay the balance off in full and on time each month you won’t be charged and it will be easier to be accepted in future.
9. DON’T LEAVE FOOTPRINTS
The worst thing you can do is to make multiple failed applications in a short period of time.
Price comparison sites like Moneysupermarket.com and Moneyexpert.com have free credit profiling tools that help you search for the most suitable credit for your circumstances.
10. KEEP CHECK
Check your credit file at least once a year, and especially before applying for new credit.