How to get control of your credit score

Your credit file is your passport to loans, credit, mortgages and much more. Yet judging by my postbag, there’s a lot of confusion over what lies within your credit reference report, how credit scoring works and why you might get turned down if you want to borrow money.

Well fear not! Here’s my guide to credit scores, files and your rights.

Credit score versus credit reference file

Online sources will help you get your credit rating straight (Picture: Adobe)

Think of your credit score as a number that helps lenders understand how much money they can lend to you. The higher the score, the safer a prospect you are. Credit scores go up and down over time, depending on your finances, but even in the worst scenarios forever – you can always turn them around.

Credit reference agencies set your credit score and there are three of them in the UK: Experian, Equifax and TransUnion. You can request your statutory credit report for free (avoid unnecessary subscription services). If there is anything on there that is incorrect or unfair, you can appeal.

Your credit reference file is a report that covers all of the data that credit reference agencies hold on you. This includes information on loans, credit cards and other financial commitments you have – along with outstanding debts too. The file also records the number of applications for credit you make over a rolling 12 month period. If you apply for credit too many times, it can affect your credit score.

What about my personal information?

Your credit file will contain personal information too, so it’s vital that this is all up to date.

It’s essential to be on the electoral roll. This tells businesses that you are who you say you are and you are living at the address listed on the credit file. If you’re not on the electoral register it’s really easy to sort out. Just follow the guide on the Gov.uk website: https://www.gov.uk/electoral-register

Make sure your personal details are all correct as these may be cross-referenced from time to time. So check that your birthdate and the time you have been resident at your last few addresses are accurate too.

Inevitably, 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 see what’s on my credit file?

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. Avoid signing up for the monthly subscriptions – your statutory report comes at no charge for the digital version.

A subscription gets you a more detailed credit report. You should be able to cancel this at any time, but check that you have done so as loads of readers tell me they forgot and ended up paying fees for months or years.

When you receive your free or subscription credit report, it’s not always so straightforward to read or understand. I’d start by checking if your personal details are all correct. Then look at the section showing your existing or settled loans, credit and other 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. If a debt has nothing to do with you, the credit reference agency can put a ‘notice of disassociation’ on the file, which separates you from the debt while things are sorted out.

I’ve been turned down for credit even though I have a good credit score – why?

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.

Martyn James is a top consumer rights campaigner and broadcaster and journalist. Read more from Martyn at this link.