Mysteries of your credit file and score explained - and is there a blacklist?

Mysteries of your credit file and score explained - and is there a blacklist? Consumer rights expert Martyn James explains how credit reference files work and what you might want to check if you’re planning on borrowing some money in the coming months It’s that time of year when the sales kick in and we start planning for Christmas (there, I said it). Having said that, I know that many readers are worried about their finances and rising bills. So you may be thinking about taking out a loan or credit or renegotiating your finances by consolidating your debts or using an interest-free credit card deal to avoid paying interest. And that means you’ll face a credit check. Credit reference agencies are the holders of our financial records yet for many people, they remain a mystery. That’s despite the fact that you can get your credit file for free at any time. So here’s my guide to how credit reference files work and what you might want to check if you’re planning on borrowing some money in the coming months. To see more of the stories you love from The Mirror and to find them easily in Google then make us your preferred source. Free and easy-to-do, just click on the link here to find more from The Mirror at the top of your feed. Introducing the credit reference agencies There are three main credit reference agencies in the UK and they each use different ways to score you. You do not have one universal credit score. The main credit reference agencies are Experian, Equifax and TransUnion. Different lenders and businesses use different agencies – and as a consequence, it makes sense to get your credit files from each one, so you know what they hold on record. You can request your statutory credit report for free through each of the websites. Back in the old days they were able to charge you a nominal fee to post you your files, but these days it’s totally free as the information is sent to you by email or is available online. The agencies all offer subscription services. These will give you much more information about your ‘credit worthiness’ along with explanations about how they have graded your credit ‘risk’ – which is usually a number. The higher the number, the better your credit and the more lending or better rates you will get. They can also offer you advice on how to improve your rating. However, you don’t need to pay for these services, and if you do sign up because you’re making a major purchase, like a house, for example, then don’t forget to cancel the subscription when you are done. Most importantly of all, if there is anything on your file that is incorrect or unfair, you can appeal it. What’s my credit score? Your credit score is a number that helps you understand what type of borrower you are and how lenders may view you. The higher the score, the safer a prospect you likely are. Credit scores go up and down over time, depending on your finances, but don’t panic, they aren’t stuck forever. You can improve your score in a wide range of ways. The credit reference agencies set your credit score each month. What’s my credit reference file? Your credit reference file is a kind of report that covers all of the data that credit reference agencies hold on you. This will include information on loans, credit cards and other financial borrowing or arrangements you have. It may also include details of other debts that you have that are outstanding too. The file will also record the number of applications for credit you make over a set period of time. This is usually 12 months on a ‘rolling’ basis, which means that a credit application from 13 months ago will not be factored in. If you apply for credit too many times in a 12-month period, it can affect your credit score, as this suggests you may be struggling financially. What about my personal information? Your credit file will contain personal information too, so it’s vital that this is all up to date. Most important of all is being on the electoral roll. This tells businesses that you are who you say you are and you are living at the address you’ve got on file. If you’re not on the electoral register (or roll) then it’s easy to sort you. Just follow the guide on GOV.UK. Make sure your personal details are all correct as these may be cross referenced from time to time. So check that your birthday is correct and the time you have been resident at your last few addresses is accurate too. Your credit file will also include serious matters that are on the public record. This means bankruptcies, debt management plans and other court judgements. How do I read my credit file or get my score? By law, you are entitled to your statutory credit score for free. But this isn’t always so easy to find on the credit reference agency websites. Chances are you’ll find your way to the ‘paid for’ services first. Don’t mistake the two. A paid for credit report service is one where you get a more detailed credit report, for which you pay a monthly subscription fee. You should be able to cancel this at any time, but do check that you have done so as loads of readers tell me they have forgotten, only to find they’ve been paying for a service they don’t use for a year. Look for your statuary report on the website. You may have to make a formal request for this, but it is free, unless you want it posting out to you. When you get your free or paid for credit report, it’s not always straightforward to read or understand. The main thing to do is check your personal details are all correct. Then look at the records showing your existing or settled loans, credit or borrowing. These should show if you have ‘defaulted’ or missed any payments. If you spot any errors, you can appeal these through the lender. You can also mark any disputes over errors on the credit file itself through the credit reference agency. What about other credit checks? When you apply to borrow money, a financial institution will check your credit file (with your permission). But they will often also conduct their own assessment of your credit worthiness, to see if you meet their criteria. They don’t have to tell you how this works. But if you ask, they must tell you if you failed their credit score, the credit reference agency score or both. Is there a blacklist? I’m often asked if there is a credit ‘blacklist’ that means the people on it will never get credit – but that isn’t the case. Lenders make decisions based on the information on your credit report, your application form details and any account information they already have. Even if things have gone wrong in the past, then you could still be accepted but you’re likely to be offered lower credit limits and higher interest rates. The biggest blocker to credit is defaults, County Court Judgments, bankruptcy and Individual Voluntary Arrangements (IVAs) – But these will vanish from your file eventually. What if my partner has bad credit? Credit reports are individual and only contain your personal information. Living with someone doesn’t mean your credit reports will be linked or have any impact on each other, unless you’ve applied for joint credit together. Being in a relationship doesn’t mean your credit report, or finances, are linked. The only way to link your credit reports is if you’ve applied for joint credit together in the past, for example for a bank account, loan or mortgage. If you have previously taken out credit with someone, but don’t share any joint accounts now, you can ask for a financial disassociation with all the credit reference agencies. However, joint credit accounts can leave you liable for debts as an individual if you fall out with your partner or get cleared out by the other person, so make sure you understand the repercussions before signing up. Can my address be blacklisted? The previous occupants of your address do not have any impact on your finances or your credit report. There may still be letters that come to the address, so all you need to do is write on the front they don’t live there and stick them back in the post box. You may find that utilities companies link bills to you from former tenants incorrectly. This is not acceptable and you should be able to make a formal complaint if this happens. You can also have incorrect debts placed by tracing agents removed from your credit file for free. Hard and soft credit report checks Checking your credit report doesn’t affect your score. It will show on your report as a ‘soft’ search each time you check, but this is only seen by you and nobody else. You can check your report and score as often as you like, which is usually a good idea before you apply for credit. ‘Soft’ checks are often used by some businesses as a way to see if you might get credit, for example, if you shop around and use an eligibility-checking service before pushing the button on a full application. However, ‘hard’ checks, created by you applying for credit, stay on your file for up to 12 months and can have an impact on your score if you collect too many. Why isn’t there one standard credit score measure? There is no universal credit score. Each of the three main credit reference agencies will give you a different score on a different scale. Of course, the higher this is with each agency the better. Do keep an eye on these scores and, from time to time, the data in the reports used to calculate them. - Martyn James is a leading consumer rights campaigner, TV and radio broadcaster and journalist