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CREDIT SCORING
Oh this can be quite an emotive subject and some people are convinced that a point here or there can make the difference, well………….
Not true, and here is why.
What is a Credit Score
Most lenders, and organisations that have to assess your credit worthiness use an automated computer system to obtain your score.
Now despite popular belief, these are NOT set by the Credit Reference Agencies, they are set by the financial backers and Insurers of each individual lender or financial organisation.
They are calculated on a number of factors, such as:
Perceived Financial Risk to the lender
Level of Bad Debt Provision that the lender has
Amount of bad debt the lender already has
Client Group the lender is ‘targeting’
The number of ‘open’ account you already have
The number of CCJ/Defaults you already have
The number of satisfied accounts you already have
Payment History of the accounts
Age of Accounts
To a lesser extent they also look at:
Number of searches
Number of Linked addresses
Type of accounts you have
And over-riding all of these:
Are that any bankruptcies recorded
Are there any IVA’s recorded
Are there any unsettled and settled CCJ’s recorded
Are there any CIFAS or Gone Away entries
Now this seems a lot, which is why computers ‘score’ the credit file, assigning either plus or minus points to each category.
Sooooooooooo…..
You could apply for an item and a Credit Score is a taken, and you fail the score, conversely you could go down the road apply for the same item and you pass!!
This is because each lender sets there own threshold limits on a daily basis, and don’t ask wheat they are, because they are a very closely guarded secret to each company.
But I see you can obtain your score from the CRFs, surely that is accurate?
Well yes and no.
Yes - because they will normally continually use the same criteria, but even then they go up and down a little, but only a very few points, which realistically do not make any difference in the greater scheme of things. A change over a couple of days of 10 -20 points is a mere bite on the backside, and means nownt.
No – Because these are NOT the point systems that lenders or financial organisations use, so in reality the CRF’s own Credit Scores can ONLY be seen as a rough indication
Some of the more expensive Credit Score providers will assign you to blocks such as poor, good, excellent and once again these means damned all in reality, what is good for one lender may well be poor for another lender. However, they also edge there bets on this, they will give a poor to anyone who has defaults, CCJs, Bankruptcies IVA’s, etc. They will give a good to everyone else …… I certainly have never heard of anyone with an excellent!!!
I want to improve my Credit Score, is there anything I can do?
Yep there is a lot, but you have to realise you can only improve it so far.
First you need to obtain your Credit Files
Then you need to see what negative information is on there.
If you had a bankruptcy are the Default dates correct are the account marked as satisfied / settles/ partial - if not then you need to get on and do this, as this will add (over time) significantly to your Score.
If you had a IVA are the Default dates correct are the account marked as satisfied / settles/ partial - if not then you need to get on and do this, as this will add (over time) significantly to your Score.
Do you have CCJ’s showing – have you satisfied (paid the CCJ off) within 28 days of it being issued, then you can get the CCJ removed – Was is satisfied after the 28 days, in which case it should be shown as settled (on the date you settled it)
Do you have Defaults showing – if you have brought the account back up to date then call the creditors and see if they will remove it, some will some wont – were you aware that a default had been issued, if not is a small number of cases you can get it removed (but if you have defaulted on the account they will then correctly issue a new one and that has a more negative effect than the old one!).
Do you have old debt account that you hoped had gone away – Well this is a difficult one if a search is done to trace you then that is logged and there is nothing you can realistically do about it as these are recorded for 6 years. However if it refers to a debt that has been satisfied then you can ask the searcher to remove it, if they don’t then you can go to the ICO with a complaint and get it removed that way.
Application for Credit Searches – the more you have in the shorter period of time the lower your score will be …… it makes it look like you are in despite financial stook
Other searches – don’t worry about them as creditors don’t get to see them only you do, so they don’t affect your credit score
If you have INCORRECT negative information, then you MUST initially challenge the lender who has put it there, if they refuse to amend it then you need to take your case to the Information Commissioners Office and get them to take it up with the lender or organisation.
So what is a Good Score?
Hmmmmmm, How long is a piece of string. Sorry to sound flippant, but a good score is what each individual lender sets it at, as I have said you could apply for the same product from different lenders some will say yes some will say no, its as complx as that I’m afraid.
Should I Use a Credit Repair Company to Improve My Score?
Well I am not going to discuss the merits of you doing that other than to say many charge a lot for doing very little, and in some instances there have been cases where they have made matters considerably worse!!
Anything they can do for a high price you can do the same for a minute fraction of the cost, and very often to a much higher standard and a lot faster!!
Nearly everyone who has used these companies have been very very disappointed, and always out of pocket!!
So what is a perfect Score?
There isn’t one, I have spoke to all three credit reference agencies and all have confirmed that there is no one in the UK with a perfect score
And there advice is to get your reports and challenge any incorrect information on there, and then check your report at least annually to make sure it remains accurate and correct
Oh this can be quite an emotive subject and some people are convinced that a point here or there can make the difference, well………….
Not true, and here is why.
What is a Credit Score
Most lenders, and organisations that have to assess your credit worthiness use an automated computer system to obtain your score.
Now despite popular belief, these are NOT set by the Credit Reference Agencies, they are set by the financial backers and Insurers of each individual lender or financial organisation.
They are calculated on a number of factors, such as:
Perceived Financial Risk to the lender
Level of Bad Debt Provision that the lender has
Amount of bad debt the lender already has
Client Group the lender is ‘targeting’
The number of ‘open’ account you already have
The number of CCJ/Defaults you already have
The number of satisfied accounts you already have
Payment History of the accounts
Age of Accounts
To a lesser extent they also look at:
Number of searches
Number of Linked addresses
Type of accounts you have
And over-riding all of these:
Are that any bankruptcies recorded
Are there any IVA’s recorded
Are there any unsettled and settled CCJ’s recorded
Are there any CIFAS or Gone Away entries
Now this seems a lot, which is why computers ‘score’ the credit file, assigning either plus or minus points to each category.
Sooooooooooo…..
You could apply for an item and a Credit Score is a taken, and you fail the score, conversely you could go down the road apply for the same item and you pass!!
This is because each lender sets there own threshold limits on a daily basis, and don’t ask wheat they are, because they are a very closely guarded secret to each company.
But I see you can obtain your score from the CRFs, surely that is accurate?
Well yes and no.
Yes - because they will normally continually use the same criteria, but even then they go up and down a little, but only a very few points, which realistically do not make any difference in the greater scheme of things. A change over a couple of days of 10 -20 points is a mere bite on the backside, and means nownt.
No – Because these are NOT the point systems that lenders or financial organisations use, so in reality the CRF’s own Credit Scores can ONLY be seen as a rough indication
Some of the more expensive Credit Score providers will assign you to blocks such as poor, good, excellent and once again these means damned all in reality, what is good for one lender may well be poor for another lender. However, they also edge there bets on this, they will give a poor to anyone who has defaults, CCJs, Bankruptcies IVA’s, etc. They will give a good to everyone else …… I certainly have never heard of anyone with an excellent!!!
I want to improve my Credit Score, is there anything I can do?
Yep there is a lot, but you have to realise you can only improve it so far.
First you need to obtain your Credit Files
Then you need to see what negative information is on there.
If you had a bankruptcy are the Default dates correct are the account marked as satisfied / settles/ partial - if not then you need to get on and do this, as this will add (over time) significantly to your Score.
If you had a IVA are the Default dates correct are the account marked as satisfied / settles/ partial - if not then you need to get on and do this, as this will add (over time) significantly to your Score.
Do you have CCJ’s showing – have you satisfied (paid the CCJ off) within 28 days of it being issued, then you can get the CCJ removed – Was is satisfied after the 28 days, in which case it should be shown as settled (on the date you settled it)
Do you have Defaults showing – if you have brought the account back up to date then call the creditors and see if they will remove it, some will some wont – were you aware that a default had been issued, if not is a small number of cases you can get it removed (but if you have defaulted on the account they will then correctly issue a new one and that has a more negative effect than the old one!).
Do you have old debt account that you hoped had gone away – Well this is a difficult one if a search is done to trace you then that is logged and there is nothing you can realistically do about it as these are recorded for 6 years. However if it refers to a debt that has been satisfied then you can ask the searcher to remove it, if they don’t then you can go to the ICO with a complaint and get it removed that way.
Application for Credit Searches – the more you have in the shorter period of time the lower your score will be …… it makes it look like you are in despite financial stook
Other searches – don’t worry about them as creditors don’t get to see them only you do, so they don’t affect your credit score
If you have INCORRECT negative information, then you MUST initially challenge the lender who has put it there, if they refuse to amend it then you need to take your case to the Information Commissioners Office and get them to take it up with the lender or organisation.
So what is a Good Score?
Hmmmmmm, How long is a piece of string. Sorry to sound flippant, but a good score is what each individual lender sets it at, as I have said you could apply for the same product from different lenders some will say yes some will say no, its as complx as that I’m afraid.
Should I Use a Credit Repair Company to Improve My Score?
Well I am not going to discuss the merits of you doing that other than to say many charge a lot for doing very little, and in some instances there have been cases where they have made matters considerably worse!!
Anything they can do for a high price you can do the same for a minute fraction of the cost, and very often to a much higher standard and a lot faster!!
Nearly everyone who has used these companies have been very very disappointed, and always out of pocket!!
So what is a perfect Score?
There isn’t one, I have spoke to all three credit reference agencies and all have confirmed that there is no one in the UK with a perfect score
And there advice is to get your reports and challenge any incorrect information on there, and then check your report at least annually to make sure it remains accurate and correct
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