Understanding your credit score; reading your report
The report will generally begin with your personal data e.g. address date of birth etc.
It will list your registrations on the electoral roll, known aliases, financial connections, public record information (CCJ's and Bankruptcies etc).
It also lists all known credit accounts and the most recent payment history for these accounts usually for twelve months.
Start by checking your personal information is correct such as your date of birth, current address and electoral roll etc.
While very small errors are a common occurrence having corrected may be worthwhile but if anything is totally wrong then it's important to follow this up with the report provider.
An example may be a completely incorrect address or date of birth.
A common issue is lack of registration on the electoral roll.
This information is used to provide evidence of your residence at an address to combat fraud, so if you haven't updated this since moving property it's well worth doing so as it's a common source of delay.
One of the most important sections is the public record information. County Court Judgments or CCJ's and records of bankruptcy or criminal proceedings for Fraud etc will seriously impair your application.
It's surprisingly common for people to be issued with a CCJ without their knowledge particularly in relation to unpaid utility bills where no forwarding address has been left at a previous residence.
If you have had a CCJ filed against you incorrectly then it's imperative that you follow this up by contacting the report provider and finding out who filed it.
Did you legitimately owe the money claimed?.
If not then you may be able to have it removed from your record.
If the CCJ is legitimate you may wish to pay the amount outstanding and have a note listed in the corrections section to show your honesty in the matter.
This is basically an indicator of your reliability in repaying a loan.
Whilst it's something that can happen to anyone it will indicate that you are a higher risk so this information will almost certainly result in an increase in the interest rate you might be offered.
However after time these will be treated with less importance so if you have a CCJ or bankruptcy listed then while you may struggle to get cheap credit initially, if you manage your payments well in time your credit score will improve and after a few years it's likely to return to normal.
You will then see a list of all your previous and current credit contracts with details of payment history usually for the last twelve months the account was active.
This is where a lender will see history of missed payments, defaults and arrears.
Again if any don't relate to you then follow it up, especially if it is an account you are not aware of as it might be an error but it could be a sign of fraud!
If you have missed payments listed then these are unlikely to seriously affect your score but will be looked at as part of the broader picture, so it pays to improve this by taking simple steps like setting up direct debit payments for credit cards and store cards etc and generally taking measures to ensure that payments always come out on time.
If you have several missed payments on unsecured credit then it is likely to affect applications with other risk factors.
Such as a small deposit, high level of borrowing to income or for applications for loans such as buy to let or shared ownership which are considered more risky in nature.
When a missed payment progresses to a default or arrears then it will be scrutinised (this is generally when the lender issues a warning letter after notification of late payment).
The more of these showing on your account then the more difficult it will be for you to find credit as it's a sign that you may be having difficulty keeping up with payments.
These will also affect the rate you may be offered particularly when they are arrears on your mortgage or other secured loan.
Smaller defaults for example on a credit card will be less significant but play a part in the underwriting process.
Another important aspect of credit scoring is the number and nature of credit applications you have made recently.
If you have tried several lenders then you may find it becomes progressively more difficult to borrow as when you apply for credit the search leaves an imprint.
If there are a significant number of searches in your name in quick succession it could be interpreted as an indicator that you're struggling to keep up with payments or in the worst case scenario about to leave the country!
For this reason it's good to limit the number of applications (be that a mortgage, loan, credit card, hire purchase or phone contract) that you place in quick succession in any three month period.
As with many things in life if it's an accurate portrayal of you, your accounts and their history then there's little point worrying about it but every reason to try and improve it for the future.
If it is inaccurate then it could cost you a lot of money or make your life a lot more complicated so it pays to check it, and were more than happy to take you through it.