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10 things you must know about your credit rating

Boost your credit 'score' to save ££s on borrowing

As banks target their products at consumers with an excellent credit history, find out how to boost your chances of getting the best deal with our myth-busting credit report top tips.

People and laptop, looking at credit report

Your credit report contains information about your past dealings with lenders

1.There is no such thing as a universal credit score

Nobody has a single credit ‘score’ or number that lenders will use when deciding whether to let them borrow. Instead, when you apply for credit, or if you already have credit, your lenders have access to your credit report, which consists of information about your credit history.

Credit scoring does happen, but each lender uses its own system to assess how creditworthy you are and comes up with its own ‘score’. It will never tell you the rating it has given you.

2. There is no such thing as a credit ‘blacklist’

As with credit scores, banks decide on a case-by-case basis whether to lend to you or not. There is no central list that stops you being accepted for a loan, credit card or mortgage.

So, one lender may decide to lend to you, while another will not – all using the same information from the same credit reference agency.

3. Your credit history won’t just affect whether your application for credit is successful

When a credit card or loan company advertises an interest rate (APR) of 8.9%, it doesn’t mean that everyone whose application is successful will get that rate.

When they advertise a particular interest rate, banks only have to expect to offer that rate to two-thirds of the people it accepts. If your credit history isn’t quite as good as it could be, the bank might offer you the card or loan, but at a higher interest rate, costing you more in the long run. Improving your credit report will mean you’re more likely to be offered the advertised rate.

4. You don’t need to pay a monthly subscription to a credit reference agency

When you visit a credit reference agency’s website, it’ll try to tempt you into taking out a monthly subscription, often costing around £7 a month. However, you can get a copy of your credit file for just £2 per agency.

5. Different credit reference agencies hold different information about you

There are three credit reference agencies in the UK – Callcredit, Equifax and Experian – and it’s unlikely they will all store identical information about you. Banks and building societies share information with credit reference agencies, but not all banks share information with all three CRAs. This means that a mistake may appear on your credit file with one CRA, but not with the other two. It’s therefore important to check your £2 report with each of the three.

6. You have the right to explain entries on your credit report

If there’s a mistake on your credit report, you should write to the credit reference agency to get it corrected.

However, there may be an entry on your report that, while technically correct, doesn’t give a full picture of the circumstances surrounding the entry. For example, a sudden bereavement that may have caused you to miss a credit card or loan repayment. In these circumstances, you can add a notice of correction of up to 200 words, which will be added to your file. Lenders have to read this notice of correction whenever they are considering an application for credit.

7. Some items stay on your credit report for six years

If you declare yourself bankrupt or take out an individual voluntary agreement (IVA), this will stay on your credit file for six years and will severely affect your chances of getting credit during that period. It’s vital to consider this when exploring debt solutions – make sure you take independent, free advice. See our Dealing with debt guide for contact details.

8. ‘Good behaviour’ doesn’t guarantee a good credit rating

If you have never borrowed money in the past and have lots of cash in the bank, you might think you’ll have a good credit rating. In fact, this is unlikely to be true.

If you have never borrowed, your credit history is probably very short or non-existent, known as having a ‘thin file’. This will make it difficult for a lender to assess whether or not you are likely to repay what you borrow from them. Consequently, you may find you are turned down for market-leading credit cards and loans – even if you could comfortably afford to pay them back.

To improve your score it could be worth getting a credit card aimed at people with a poor, or no, credit history. While the APRs tend to be eye-wateringly high, if you pay off your balance every single month, you won’t pay any interest and you’ll give your credit reputation a boost.

9. The electoral roll really matters

If you’re not on the electoral roll, it’s likely you will find it very difficult to get credit – so it’s important to ensure you are registered to vote before applying for a loan or credit card.

Your local authority is likely to contact you once a year, prompting you to ensure that anyone eligible to vote in your household is on the electoral roll. However, you don’t have to wait for this reminder to drop through the letterbox: you can register to vote online at any time through the About My Vote website.

10. Your partner won’t automatically affect your credit file, but your ex-wife might…

Contrary to popular belief, cohabiting with or being married to someone with a bad credit rating doesn’t automatically affect your own – but taking out a joint financial product with them will. Opening a joint current account, for example, will create a ‘financial association’ between two people, which is likely to affect the way potential lenders view both individuals. If one has a ‘bad’ credit history, it could impact the other’s ability to get credit.

If you have ever jointly held a financial product with someone you no longer have a relationship with, ensure that this is reflected by asking all three credit reference agencies to add a ‘notice of disassociation’ to your file. Otherwise your ex-wife or ex-husband’s dodgy finances could have a negative effect on your own credit file, even though you’re no longer together.

More top tips in the Which? guide to your credit report

For even more ways to improve your chances of getting the very best deals on credit cards, personal loans and , read our newly revamped guide to Checking your credit report, which includes top tips on improving your credit reputation and correcting mistakes on your credit file.

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