‘I’m a credit expert – these are the steps you need to take to boost your score’ | Personal Finance | Finance

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The lack of a good credit score can lock people out of their dreams, everything from buying a home to funding a wedding.

Those who have a low score will be turned away from banks and building societies when applying for a mortgage, personal loan or car finance.

This means they are forced into more expensive and risky borrowing options, potentially including loan sharks – or even tapping up family and friends.

James Lynn, the chief executive of BuildMyCreditScore told Express.co.uk: “Having a good credit score opens up huge opportunities.

“But millions of people across the UK have a low score and thin credit file, leaving them with fewer fair and affordable options when it comes to securing credit, and part of the problem is a widespread lack of awareness about what can impact a credit score.”

Here Mr Lynn shares his ideas on what people can look at to boost their credit score:

Build a credit record

Credit scoring models require a minimum amount of data to score someone.

People who have recently moved to the country, or never used credit before, will likely not have generated enough information for a credit score, and may be ‘credit invisible’.

There are ways to build credit, including signing up for a starter credit card or working with a credit reporting company to get more of your monthly bills added to your credit report. But you should carefully consider what’s right for your circumstances.

Check your credit report regularly

One of the common myths is that checking your credit report frequently negatively impacts your credit score. The opposite is true.

Keeping tabs on your credit report and score will help you notice any mistakes that need fixing and could also help you pick up any fraudulent activity – like if someone has used your details to apply for a loan. 

Be aware that creditors can – and do – choose which credit scores to use

The country’s creditors can choose to use whichever credit reference agency they prefer, and whichever serves them best.

You often won’t know which agency they use to evaluate your application – and they could even use a combination of multiple credit scores. Others will develop their own proprietary scoring models.

Be aware that a credit score can impact much more than just loans

Lenders often use credit reports and scores, but your credit score can be important even if you’re not taking out a loan.

Landlords may check your credit score before offering you a rental contract, whilst employers sometimes lean on credit histories in hiring decisions. It is also quite common for insurance companies to use credit-based insurance scores when working out your premium.

Not all credit is treated equal

Your score gives you an indication of how likely you are to be approved for credit based on the information on your credit report. But not everything is treated equal because credit reference agencies each have their own methods for building your credit score.

The criteria they use are not made public but they will each treat different types of borrowing differently.

High cost, short term borrowing (such as payday loans), for example, will always be perceived negatively – even if you repay them on time – and should be avoided if possible. 

Rent payments are not counted in the way you might expect

There are now several ‘rent recognition’ schemes which help you use your rent payments to strengthen your credit files.

Despite this, the big credit reference agencies still typically treat rent payments differently and separately.

As a result, rent payments usually won’t have the same impact as actual credit, such as mortgage repayments, and therefore lenders may not take into account this information.

Postcodes can impact a credit score

There is evidence that flaws in traditional credit scoring models can still contribute to the so-called ‘poverty premium’, resulting in poor outcomes for consumers.

And while responsible credit reference agencies don’t ‘blacklist’ certain addresses, if you move around frequently, this could suggest you have an issue with affording rent – and this can have a negative impact.

The impact of using Buy Now Pay Later (BNPL)

It is not clear exactly how BNPL activity is being used by credit reference agencies. And until relatively recently, BNPL borrowing wasn’t included on credit reports.

This has started to change, with the likes of Klarna reporting its borrowing schemes to credit reference agencies. However, it’s unclear how – and even if – this information is being used to calculate credit scores or being used by lenders.

Will AI have an impact?

Some lenders are now using AI to help build credit scores.

In the credit information market, some providers are using AI and machine learning to help them create new scoring models.

When this advanced technology is combined with access to the large amounts of data in the Open Banking environment, it can help developers to uncover more accurate ways of determining risk. As a result, it is worth considering opting into to open banking services when you come across them.

Do ‘Credit builder’ credit cards help?

In recent years, the market has been flooded by ‘credit builder’ credit cards, which promise to help boost a user’s score.

It’s estimated around four million people in Britain now have a credit card specifically aimed at those with a poor credit rating. However, be aware that such cards often have interest rates of 30-70%, which compares to 20-25% on a normal credit card.

Some credit builders are offering rather dubious services, where users pay monthly fees to build their credit score, but often see little improvement in their scores and no improved access to credit products.


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