Your credit score

Credit scoring is a technique used by banks, credit card companies, mortgage lenders etc to look at the probability that a you will meet their financial commitments. Credit scoring sources information by three main  techniques: completion of their application form, looking at previous dealings you may have had with them and by referencing you against agency files.  Although there may be past errors in the first two of these sources, the agency referencing may also have incorrect data.

There are three main Credit reference agencies - Equifax, Experian and Callcredit - a spokesperson for one of these said on News 24 (23 June 2007) that 99% of the information that they hold on people was accurate. 99% is good, but they have records on 40 million UK adults!Thus, they hold inaccurate records of some description on 400,000 people. If you are one of these people you may be denied credit.

The credit agencies get their information on you from things like the  Electoral roll, Court/bankcruptcy Records, County Court Judgements and Financial Data from banks, building societies etc. The latter exchange information on you so that if you have made a number of late payments there may be 'black data' held on you and if you are someone who's pays everything on time they will have lots of 'white data'. You can be denied credit because you are too good a risk (apparently) - paying-off several credit cards in full every month means some lenders may not want you as you are not profitable enough!

How to check your credit files:

There are two ways to check your credit files:

• Send a cheque for £2.00 to the one of the three agencies and give details of your past addresses - Equifax, Experian, Callcredit
   
• You can apply online directly to the agencies but beware that they don't dummy you into a free trial which if you forget to cancel will cost you £70 (or some monthly 'service'). Better value is checkmyfile where you can get a single agency report for £6.95  (or all three for £16.95) - as a one-off payment!

If there is an error on your file, then write to the agency with a concise and factual explanation of why you disagree.

Improve your credit score

Here are some ways to improve you credit score:

• Cancel old credit cards that you don't use. This should mean that there will be more 'credit' available to you
• Keep up payments - even minimum payments - an accidental non-payment or two can damage you for years!
• If you have too many credit searches done on you (ie you've applied for several cards) it can harm your score. Phone and insurance application may also result in a search on you
• Getting on the Electoral register is a must - it's difficult to get credit if you are not on it
• Stability - in both home and employment can help. Remember that moving home can result in a lot of searches (new insurances etc)
• If you do get rejected avoid the 'spiral of rejection' - find out straight away why you have been rejected (probably due to an error) - checkmyfile

There is a way of repairing past problems - some credit card companies offer high risk cards (30% rates) for high risk people. Get one of these, spend a small amount each month and make sure you pay it off it off in full to avoid the extortionate interest rate. In a year or less you will have regained a much improved rating.

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