Credit score myths and how to improve your score

Guest expert, James Jones on credit score myths and how to improve your score

As the pandemic continues, many of us are finally settling down and tackling our finances. One of the biggest areas of concern we hear about at Resolver is problems with credit scores.

There’s actually a lot of urban myths out there about your credit reference file, so Resolver asked James Jones, from Experian to talk us through the main ones and give us a few tips on how to improve your score. Over to you James…

Myth busting

There’s a credit blacklist

There’s a persistent rumour that there’s a blacklist of people who are barred from credit. 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 people you live with can affect your credit

One of the most common myths. 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. So you can stop judging your flatmates or former tenants.

Being in a relationship links your finances

A thorny issue for people getting together. 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.

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.

Checking your credit report affects your score

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.

I have one credit score

There is no universal credit score. Each credit reference agency will give you a different score on a different scale. Of course, the higher this is with each agency the better.

When you apply for credit, lenders don’t use this score. They use your credit report information, your application details and any recent history of previous accounts with them to calculate an overall score for you. It’s this final score that helps them decide whether to accept you or not, and sometimes what the rate will be.

COVID 19 and payment holidays

What if I’m unable to make one or more regular payments because of the pandemic?

If you’re struggling to make ends meet, contact your lenders and other providers as soon as possible. They’ll talk you through any support they can provide to help you through this difficult time. This could include reducing your payments, pausing your payments for a while, increasing your credit limit, or other forms of help.

If you’re worried about your finances and would benefit from independent advice, there are several providers of free, professional, impartial support that you can contact, including National Debtline and StepChange.

Will taking an agreed payment holiday negatively affect my credit report?

If you agree with a lender to temporarily pause your payments to help you through this difficult time, this should not result in arrears building up on your credit report.

This is because new credit-reporting guidance that we’ve agreed with banks, lenders and other providers allows for a new measure called an ‘emergency payment freeze’. It has been developed directly in response to Coronavirus, to help support customers who have agreed a payment holiday with their lender.

We would recommend getting written confirmation of the arrangement you agree with your lender.

How will this payment freeze be reflected on my credit report?

If you and your lender agree an emergency payment freeze, the payment status of your account (with that lender) should not get worse while your payments are paused.

For example, if your account was up to date before the freeze began, your account will continue to show as up to date until the freeze ends. If you were already behind with payments, the level of arrears before the freeze began will continue for the length of the freeze. During the freeze, the monthly payment amount and status code shown on your report will stay the same.

James has a huge range of advice and tips on all things to do with credit, debt and your credit file here: https://www.experian.co.uk/consumer/help-discover/discover/guides/qa.html#what-is-a-payment-holiday

If you need help sorting out a problem with bills, debts or money you owe Resolver can help you for free at www.resolver.co.uk