Connect with us

Bad Credit

Credit Scores & Reports – All You Need To Know – Forbes Advisor UK



Your credit score can influence everything from the mobile phone you use to the home you live in – so it’s worthy of some care and attention.

Here we explain how credit scoring works, look at why it matters so much, and suggest what you can try if your score needs a boost.

What is a credit report?

Your credit report carries up-to-date information on you (are you on the Electoral Roll? do you have any County Court Judgments against you?) and any credit-linked products you’ve got or have had recently. This includes mortgages, loans, credit cards, overdrafts and other debt-based agreements.

It’s maintained over a rolling six-year period, and records how well you’ve managed these credit products in terms of making payments on time and in full. It also notes how many times you’ve applied for products (more on this later).

This information is used to compile a credit score which rises and falls according to your financial behaviour. The purpose of a credit report is to demonstrate to financial providers whether you’re the kind of customer they want to lend to – and, if so, on what terms.

Why is your credit report so important?

Having a bad credit score can range from being inconvenient to life-changing.

It could mean you are rejected for everyday credit agreements including mobile phone contracts, pay-monthly insurance and even some energy deals – in short, any service you receive before paying for it.

But a poor score could also leave you unable to get a mortgage to buy your own home or replace the family car.

And even where you can get access to credit, a poor score might mean you’re offered less advantageous terms. For example, when a lender uses an interest rate in a product advertisement, it only has to offer it to 51% of successful applicants – the other 49% can be charged more for the same product.

What information is on my credit report?

Your credit report will list the following details:

  • active credit accounts such as mortgages, credit cards, overdrafts and loans – and if there are any late or missed payments or defaults
  • recently closed or settled credit accounts
  • credit agreements such as mobile phone contracts and car finance
  • personal details such as your name, date of birth and current and past addresses
  • the names of anyone you have a financial association with – such as a joint mortgage or bank account
  • public record information such as County Court Judgments (CCJs) against you, bankruptcies and individual voluntary arrangements (IVAs)
  • whether you have committed fraud or have been the subject of fraud through stolen identity
  • whether you are on the electoral register.

Where is my credit report held?

Your credit report is held by credit reference agencies. The three main agencies most commonly used by the big lenders trying to figure out what sort of borrower you might be are Experian, Equifax and TransUnion (formerly CallCredit).

Credit reference agencies are regulated by the Financial Conduct Authority (FCA) and, because they hold such valuable and sensitive data on individuals, also by the Information Commissioner’s Office (ICO).

The information each agency holds about you may vary slightly. However, there shouldn’t be too much discrepancy in terms of the picture they present of your eligibility as a borrower.

What scoring systems do credit reference agencies use?

Each credit reference agency employs its own system of scoring

  • At Experian scores are marked out of a maximum 999. Above 960 is classed as ‘excellent’ while 560 or below is ‘very poor’
  • At Equifax the maximum score available is 700. Above 465 is defined as ‘excellent’ and below 280 as ‘very poor’
  • At TransUnion, the scoring system is out of 710 with 628 and above classed as ‘excellent’ and below 550 as ‘very poor’.

How do I access my credit report?

You have legal right to see information held about you in your credit report. Traditionally, this meant requesting copy of your statutory report by post for a nominal fee of around £2.

But since EU laws on privacy and data protection (GDPR) landed in 2018, all credit reference agencies must provide statutory reports for free. It’s very quick and easy to do via the agencies’ websites.

Note, however, that ‘statutory’ means just a basic report – not a full-blown credit score.

If you want more detail, you can opt to pay a monthly subscription for an ‘always-on’ credit monitoring service which offers real-time access to your credit report and provides alerts when there’s been a search or change to your credit file.

Many financial companies, such as price comparison sites, will offer to provide your credit score through commercial links they have with the credit agencies. But they’ll just show you the score rather than provide access to the report itself.

They also provide ‘eligibility checks’ – see below.

How do I know which agency a lender will use?

A lender does not have to tell you which credit reference agency (or agencies) it uses when you apply for credit – only if your application is rejected.

Banks and other lenders also voluntarily share data between themselves, meaning they are privy to financial information about you from sources outside your credit report.

It’s also important to note that some lenders employ their own scoring systems which they use in place of a credit reference agency, or alongside it.

How do I get a good credit score?

As well as making all monthly credit repayments on time and in full, there are other measures you can take to either protect or improve your credit score.

Here are some tips, with a little insider knowledge from James Jones, head of consumer affairs at Experian – the UK’s largest credit reference agency:

  • Register on the Electoral Roll This is viewed by lenders as a mark of stability and could add a straight 50 points (out of a maximum 999) onto your credit score at Experian
  • Keep credit card balances low Your ‘credit utilisation’ rate refers to the percentage of available credit that you use – and the lower it is, the better. Credit utilisation is especially important around credit cards. Balances below 30% of your limit can translate into 90 extra points at Experian, while using more than 90% of your credit card limit could wipe 50 points from your score.
  • Check all information is correct If you spot anything on your credit report that is inaccurate, you can raise a dispute with the agency via your online report for free. This will involve an investigation and you may be required to provide evidence, but it could improve your credit score. This is different to a Notice of Correction, which is 200-word ‘explanation’ you are permitted to submit next to an entry on your report. Lenders must consider these notes but bear in mind they won’t improve your score and they can in fact slow down the credit application process.
  • Don’t make multiple applications for credit This is a sure-fire way to raise suspicion among lenders and bring your score down. Staving off applying for any new credit for six months after your last application can boost your Experian score by 50 points.
  • Decouple from old financial ties If you are associated with an ex-partner on your report who has bad credit, it will bring your score down too. Contact the relevant agency or agencies and get it updated.
  • Keep some credit untouched While switching products can be good practice for getting the best deals, keeping some lines of credit to ‘mature’ will help your score – just holding the same credit card for five years can add 20 points to your Experian credit score.

How long will information stay on my score?

Your credit report lists the last six years’ worth of financial data from live accounts or from when accounts are settled or closed – even bankruptcies and IVAs.

But all time is not equal. The more recent the negative activity, the heavier it will weigh on your score.

For example, if you’ve missed a credit card repayment in the last month, Experian could deduct 130 points off your score. But if the missed payment was a year ago, it could have no impact at all.

Bear in mind, however, that scoring calculations are frequently re-calibrated, so this is only an indication.

How can I gauge my eligibility for credit?

Credit referencing is a lot more transparent than it used to be – and consumers have both greater visibility and control over their credit reports.

Before applying for credit, run a quick check of your own credit score first to rule out any surprises. You can always sign up to a comprehensive version of your report and cancel within the free 30-day trial period.

Online eligibility tools offered by lenders and comparison websites are also a boon. These carry out ‘soft searches’ which are not visible on your credit report but offer an indication of whether you are likely to be accepted for a particular deal and, in some cases, even what interest rate you may be offered.

Common credit scoring myths

Finally, there are some common myths and misconceptions around credit scoring, which can be useful to dispel:

  • “Numerous rejections are bad for your score…” Lenders don’t see rejections for credit – only applications. That said, numerous applications imply you have been turned down numerous times too.
  • “It’s best to close credit card accounts you’re not using” In fact, lenders can prefer to see several lines of open credit that you are not utilising – it means you’re not dependent on one.
  • “You can be added to a black list” There is no black list – just very poor credit scores.
  • “A particular address can affect your credit score” Credit scores apply to people, not property. This means you will not be associated with your landlord, flatmates – or even your spouse – unless you have a financial association with them. It just matters that you are on the electoral roll.
  • “Your salary is included in your credit report” Only credit agreements feature on your credit report, so your salary is not relevant and is not listed. By the same token, your current account balance will only feature if you’re overdrawn.
  • “Checking my credit report will raise suspicion” Lenders cannot tell if you have checked your credit report.
  • “Lending decisions hinge entirely on your credit score Your credit score is very important, but lenders also employ their own more subjective ‘policy rules’. For example, if you’ve recently paid off a bad debt in full, while your score might not improve, it could be enough for the lender to show you a green light over a red one.

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Bad Credit

10 things you didn’t know will help you get a mortgage



Anyone who wants to apply for a mortgage right now will know that it’s not easy. Coronavirus has made the process of applying longer, while lenders are now more careful than ever about who they will lend to. You probably already know that having a healthy credit score is essential to a successful mortgage application, but how can it be achieved? Personal finance experts from Ocean Finance  weigh in with the top tips for making sure your application is a success – that you may not have heard about. 

1. Make sure your name is on all household bills

If you share a rental, it can be tempting to let someone else put their name down on the utility bills and just pay them back. If you want a mortgage, avoid doing this: bills with your name and address on them are proof that you pay them on time. This especially applies to the rent itself – never move into a house share without your name being on the contract. Before applying for a mortgage, ask your landlord for a letter confirming that you pay on time. 

Source link

Continue Reading

Bad Credit

How Can I Prequalify for a Personal Loan? A Guide



When you are in need of money quickly, you very likely don’t want to sit around pondering a bunch of different options. You want to find the option that works best for you and utilise it. Unfortunately for so many people around the country, it can be difficult to get their hands on the money they need due to them having a bad credit score, or even no credit score at all.

How Can I Prequalify for a Personal Loan?

Photo, Varun Gaba.

Your credit score is thought of as being pretty important, as it shows your financial trustworthiness to financial institutions like banks, credit card companies, lenders, and more. Your credit score is one thing that will usually be considered by just about any company you apply for a loan through, so keeping a close eye on your credit score is imperative for your financial life.

No matter what your credit score looks like, knowing how you can prequalify for a personal loan can be a comforting feeling when you are in need of quick cash. After all, when you are eligible for personal loan prequalification, you feel a little better going into the loan process knowing you won’t have to wait around for a loan decision.

How is Pre-qualification Decided? Prequalifying for a personal loan can depend on several different factors that you will have to keep in mind, and it will vary greatly depending on the lender you are applying through. Here are two of the things you will need to keep in mind when it comes to your loan that could affect whether or not you prequalify for the loan.

— Your credit score; Yes, this is always going to be something you are going to need to think about. Depending on the financial institution or lender you are going through, you can bet that your credit history and score will play a huge part in whether or not you prequalify.

— The amount of your loan; How much money you plan on borrowing from the lender or bank is also going to play a part in deciding whether or not you prequalify.

To get the most out of your search for a lender that you could prequalify with, think about applying with more than just one lender. This way, you might get several pre-qualification offers, and this will allow you to sort through the lenders and decide which one works best for you.

How Can I Prequalify for a Personal Loan?

Photo, Christina @

The Pre-qualification Process: No matter where you are trying to prequalify for your loan through, you will find the process to be pretty simple and largely similar across most lending platforms. You will need to provide some information to the lender that will help them decide whether or not to prequalify you.

How Can I Prequalify for a Personal Loan?

Photo, Windows.

Some of the information you will need to provide includes:

— Your full name; You will want to make sure you provide your full legal name so you can make the process simple for yourself and the lender. Depending on the lender, you might also be asked to provide images of your government issued ID or driver’s license to validate your identity.

— Your income and information on your job; Your income and employment status are often considered over your credit score when it comes to pre-qualification for loans, especially if you are applying for a personal loan through a lender who deals with customers with bad credit or no credit.

— The loan amount you want; Of course, you will have to include the amount of money you would like to borrow. Make sure it is something reasonable, and something that you can realistically pay back on time.

What Will the Lender Do? If you are trying to prequalify through a lender who specialises in bad credit clients, then you won’t have to worry about your credit score being negatively affected by taking out your loan. However, if the lender reports to the credit bureaus, your payments could still make an impact on your credit score.

If not working with a specialised lender, you might find that the lender will do a soft inquiry on your credit when going through the pre-qualification process. No worries here, as this doesn’t put any dents in your score. If you prequalify for the loan you are looking for, you should get an alert via email from the lender of your choice.

The Money You Need: Hopefully, you will have prequalified for the loan you are looking for so you can ensure you have access to the money you need, when you need it. Whether you’re going through some unexpected circumstance in life or just need money to pay something off quickly, knowing you are prequalified for the loan you need is a comforting feeling, allowing you access to the cash you need for whatever you need it for.

Source link

Continue Reading

Bad Credit

Are No Down Payment Auto Loans Bad?



Qualifying for a zero-down car deal likely means having good credit and qualifying income. However, if you’re a bad credit borrower, you’d be hard-pressed to qualify for an auto loan without a down payment. Besides – down payments are typically a great idea for borrowers across all credit ranges!

Is Zero Down a Bad Idea?

Opting for a zero-down car loan isn’t a bad thing – but with a lower credit score, it’s not likely to happen. Most bad credit auto lenders require at least $1,000 down or that you bring at least 10% of the vehicle’s selling price to the table. Down payments are a requirement of most subprime (bad credit) lenders, and it’s often called having “skin in the game.”

Are No Down Payment Car Loans Bad?Research shows that borrowers with skin in the game are more likely to complete a car loan. To a lender, a borrower that brings a down payment to a deal is more likely to make their payments, complete the loan, and avoid default. It also means a higher likelihood of qualifying for the auto loan.

Down payments can widen your vehicle choices since they allow you to get into more expensive cars that are outside your preapproval amount. If you’re approved for a $15,000 auto loan, but can’t find anything for your situation, adding a larger down payment amount may open up more vehicle choices. In this scenario, if you have your heart set on an $18,000 vehicle, coming in with a $3,000 down payment could put it in your price range.

More Down Payment Benefits

Auto loans are typically simple interest loans, meaning you’re charged interest on the principal of your loan. If you combine a large loan amount, a high interest rate, and a long term, it can mean paying more than your vehicle is worth.

Remember this:

High loan amount + High interest rate + Long loan term = Paying more interest charges. A down payment can combat this, and help save you money.

For borrowers with poor credit, a high interest rate could mean paying more for your auto loan – but a down payment can soften the blow.

Down payments can help protect you from negative equity, too. Negative equity is when you owe more on the auto loan than what the car is valued at. Vehicles are depreciating assets, meaning they lose value over time, and that never stops.

Negative equity causes problems for borrowers when it’s time to sell the vehicle. If you owe thousands more on the loan than what you can sell the car for, you may not be able to sell the car. You must pay off the loan before you can transfer vehicle ownership.

If you finance a vehicle for $10,000, that car may not be worth $10,000 in a year. Most used vehicles lose around 10% to 15% of their value each year. Brand new vehicles can see around a 20% drop in value within the first 12 months of ownership! Having a down payment can help keep your auto loan in an equity position, which means you’re likely to have fewer issues selling the car if you need to.

How Much Should Save for a Down Payment?

Your down payment requirement largely depends on your credit score and the size of the loan you’re applying for. Like we mentioned, saving at least $1,000 is probably a good starting point if your credit score is less than perfect. But if the vehicle you want is expensive, it could mean having to shell out more cash than that to qualify for the loan.

How much you need to save can also depend on your monthly budget. If you want a specific vehicle but the monthly payments are too high, you can put more cash down to lower your payment and make the loan work for your situation. You can use our auto loan calculator to estimate how much you may need to put down to get your car payment where you want.

You also don’t need cold, hard cash to meet a down payment requirement. Trade-ins with equity can completely satisfy a down payment requirement if there’s enough value, or you can use a combination of cash and your trade-in. If you have a car you’d like to trade in, research its estimated value on sites such as NADAguides and Kelley Blue Book so you can see what a dealer may offer.

The bottom line with down payments is you should save as much as you comfortably can afford. Even if you qualify for a zero-down car loan, putting cash down on your next auto loan is only going to bring you benefits in the long run.

Where Can I Find Bad Credit Car Loans?

If your income or credit score isn’t quite up to snuff, then you can expect to need some cash down to qualify for vehicle financing. You may also need to work with the right auto lender to get the vehicle financing you need.

With a lower credit score, not only are you faced with a down payment requirement but also the struggle of having to find an auto lender that can work with poor credit. Most traditional auto lenders prefer borrowers with good credit. If your credit score is rough around the edges, then applying for vehicle financing through a special finance dealership could be the way to go.

Special finance dealerships are signed up with subprime lenders. These lenders specialize in assisting borrowers with credit challenges and look at more than your credit reports and score. They do require a down payment, but they can often work around tough credit circumstances.

At Auto Credit Express, we’ve amassed a nationwide network of special finance dealerships and we want to help you find one in your local area. To get matched to a dealer near you that has bad credit lending options, fill out our free auto loan request form.

(function(d, s, id){ var js, fjs = d.getElementsByTagName(s)[0]; if (d.getElementById(id)) {return;} js = d.createElement(s); = id; js.src = ""; fjs.parentNode.insertBefore(js, fjs); }(document, 'script', 'facebook-jssdk'));

Source link

Continue Reading