Your credit score impacts your ability to obtain potentially beneficial financial products, including cashback & reward credit cards, 0% balance transfer credit cards, residential mortgages, buy-to-let mortgages and even mobile phone contracts. Today, we show you how to check your credit score, and more importantly, how to check your credit score for free.
You can check your credit score for free via the banner below. However, we recommend that you read on to fully understand your credit score, what it means and how you can improve it:
What is a “credit score”?
Companies, called credit bureaus, collect information from your creditors about the amounts that you owe and the payments that you make. From this information, they use specific statistical model to assign you a risk factor, which indicates how likely you are to pay back any future debts. This is known as your “credit score”.
Frustratingly, there is not one “standard” credit score rating. Each credit bureau uses a different statistical model, and therefore the actual score will be different at each.
At Equifax, for example, the average credit score is 430 and their ranges are broken down as follows:
- 467 and above: Excellent
- 420 – 466: Good
- 367 – 419: Okay
- 279 – 366: Poor
- 0 – 278: Very Poor
What affects my credit score?
In the UK, your credit score is generally dependent on the following factors:
- Existing payment history: The most important factor affecting your credit score is your history of payments made. If you have already illustrated that you are trustworthy with credit, financial institutions will be much more willing to lend to you. Therefore, a history of paying down your credit cards in full (which you would be doing each month if you follow our advice) will help your credit score.
- Credit limits used: Your credit score also incorporates how much credit is available to you, compared to what you use. For instance, if you have two credit cards, each with a £5,000 credit limit and your balance hovers around £4,950 on each, you will be considered greater risk and hence your credit score will fall. The “sweet spot” is to use around 60% of your credit limit.
- Missed payments: If you pay all of your bills on time, then your credit score will be fine. However, missed payments give a flag on your account which can impact your overall credit score. Sometimes, these can pop up erroneously on your credit score, but we’ll come back to that later.
- Length of accounts in use: Your credit score also likes you to have a nice long history with certain accounts. Again, this is intuitively the case. If you have been previously good with credit for the past 10 years, it makes you’re a lower risk case than someone who took out their first credit card two weeks ago. Therefore, if you have a credit card which you have used for many years, but no longer need, it may be better to leave it open and inactive for up to 2 years instead of closing it immediately.
- Public records: Negative public records are your credit scores Achilles heel. It absolutely destroys them. If you have had any County Court Judgements, your credit score will be severely impacted. If this does ever happen to you, make sure you pay it within one calendar month and it will be removed from your credit report.
- Electoral register: Your credit score also likes stability in your address. If you can register to vote from one address, this helps your credit score.
- People you are financially linked to: As you may see when you check your credit score, there may be people with whom you have applied for credit in the past. These people will then stay as “financially linked” on your credit report until you ask for them to be removed.
How to check your credit score for free
One of the largest credit bureaus in the UK, Equifax, allow you to sign up to a 30 day free trial. All you need to do is follow the following steps:
- Either follow this link to Equifax or click on the banner below.
- Sign up with Equifax.
- Obtain your credit report and score for free.
- Analyse and resolve any potential issues on your credit report.
- Cancel your account membership within 30 days of signing up on the website, over the phone or via email. There are no strings attached and Equifax will simply close your account without any questions or pressure to leave it open.
To check your credit score in the United States go to cafecredit.com.
What will you receive from your credit report and score?
Let’s start with your credit score.
When you obtain your free credit score, Equifax will provide you with your score (plus to factors which contribute to that score), together with a credit score history to show how your actions have affected your credit score over time:3
To find out more information about the credit score, you can then investigate your detailed credit report to see what areas of your file are strong, and which need further attention.
In this example, this individual can easily see from the dashboard that their credit agreements looking at. They can then enter the credit agreement section and locate the problem:
Indeed, poor old Sue has defaulted on one fixed term loan.
The beauty of checking this report fairly often is that it will often highlight issues that you weren’t aware of. Sue Stevenson (from the example above) was probably aware that she didn’t pay her loan for 4 months.
However, last year I changed my mortgage payment schedule from paying on the 23rd of each month, to the first day of each month. Therefore, my payment for February came out on 23/02. My next payment (for March) was due to come out on 01/03, but the bank made an error and moved the next payment to 01/04/2014. This registered as April’s payment and hence I missed one month of mortgage payments. My credit report noted this fact within 30 days, and I was quickly able to address the issue due to it being a fault of the bank.
The myths of checking your credit score
For some reason, and I have no idea why, the credit score remains a mystery to many and there are always misunderstanding and myths surrounding your score. Here are just a few clarifications which may address some of your questions if you listen to these myths:
- Lending decisions: The credit agency doesn’t make the lending decision. This is the job of the lender themselves and they based their decision on your credit score and report which is supplied by the credit agency.
- Student loans: Student loans do not impact your credit score (unless a CCJ has been enforced due to non-payment)
- How much money you have: Your income, savings and investments will never impact your credit score. Your ability to repay credit is based on your history of doing so, not on how much cash you have in the bank.
- Credit blacklists: Quite simply, these do not exist.
- Previous occupants: Previous occupants at your home address do no impact your credit rating
- Race: Race and religion is never considered
- Paying down in full: Repaying your credit cards in full each month will not lower your credit score. In fact, this shows your ability to fully repay your debt and hence means that you can usually afford more borrowing in the eyes of lenders.
- Parking fines: Parking fines and other traffic offences do not impact your credit score (unless a CCJ has been enforced due to non-payment)
- Financial ties: Unless you are “financially linked” through existing products, no one else will appear on your credit score – not your landlord, not your tenant, not your husband/wife, not your doctor…
- Criminal record: No criminal convictions are listed on your credit score
- Credit history: Items do not stay on your credit score forever. If you can prove an item is an error, you can get this removed by contacting the credit agencies. Otherwise, items only stay on your credit score for a period of 6 years.
- Council tax: Council tax payments / non-payments do not impact your credit score (unless a CCJ has been enforced due to non-payment)
- Standard scores: As previously mentioned, credit scores are not a standard score. They are provided by the credit bureaus and the actual score will depend on which agency you refer to.
- Need for a credit score: “I don’t need a credit score” – whilst this may be true for some people, most individuals will at some point in their lives have a mortgage on their residential property and this will partially depend on your credit score (although many other factors play a role).
- The last word: The credit bureaus don’t have the last say. If you think that there is an error on your credit report and the agency refuses to address it, you can take your complaint to the Financial Ombudsman, and if they decide that the item on your file is an error, all traces of this will be removed.
What does Bobby say about it all?
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