The cost-of-living crisis has led to millions of people taking a cold hard look at their finances and cutting back. Yet making ends meet is only part of the problem.
Thousands of people make complaints every year about their credit files and how credit scores work is one of the most common questions I get asked.
The fact of the matter is most credit reference agency complaints actually come down to the businesses that have placed ‘markers’ on the file, not the agency itself. The good news is sorting out a problem doesn’t have to be a nightmare – and you can usually take it further too if the business isn’t playing ball.
There’s actually a lot of urban myths out there about your credit reference file, so I spoke to my fellow TV expert and Experian credit reference specialist, James Jones, to bust some myths about your credit file.
There’s a big credit blacklist
The most common credit file myth is there’s a blacklist of people who are barred from credit forever (or for a long time). Luckily there’s no such thing. 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 a little awry 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 County Court Judgments, bankruptcy and Individual Voluntary Arrangements (IVAs) – and even they’re not forever.
The people you live with can affect your credit
Are you looking at your flatmate and blaming them for not getting a credit card? Don’t take it out on them. Credit reports these days 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 links your finances
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 accounts, investments and credit 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.
Previous house occupants affect your score
This is a common myth, especially when people are living in rented accommodation. 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.
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. 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.
I have one credit score
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.