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Checking your credit score is easy – and it can save you money

We reveal everything you ever wanted to know about credit ratings (but were afraid to ask)
Image credit: Experian/Getty

One of the enduring myths around borrowing is that any time you check your credit score, it will go down. Thankfully, this is nothing more than a myth. And there are many advantages to looking into your credit history, as James Jones, head of consumer affairs at credit ratings company Experian, points out.

“It really does pay to make sure your credit report and score are in good shape, given the role they play in helping lenders decide who to lend to and sometimes on what terms,” Jones says.

“This will make it easier for you to access affordable borrowing when you need it. You can check your credit score for free, for example on our website, where you’ll also get help on how you may be able to boost your score, sometimes by taking relatively simple steps.”

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The Big Issue has teamed up with Experian as part of their United for Financial Health programme, and are working with a range of experts to share helpful advice and tips on how to keep in control of your money and be in as strong a position as you can be through the pandemic, and beyond.

Here James explains everything you ever wanted to know about credit scores (but were afraid to ask).

What is my credit score?

Credit reference agencies piece together financial information relevant to how we manage credit. They then make these reports available to lenders when we apply for new credit. Credit ratings (or scores) simply boil down the information into a simple number that indicates the risk of someone missing future repayments.

Why is credit rating important?

Credit ratings help lenders measure and manage the risk of lending money to people. They help a lender determine whether they will approve a credit application and, sometimes, how much they lend us and what interest rate they charge.

What sort of things can it affect?

A wide range of organisations use credit reports including mortgage lenders, banks, credit card firms, mobile phone providers and energy firms. Some landlords and employers may carry out a credit check, with your permission, although the information they see is usually limited.

What difference does it make?

A high credit score will help you secure the best ‘headline’ deals. This is because not everyone gets the cheapest advertised interest rate. Our research suggests that improving your Experian credit score by one score band could see the APRs for unsecured personal loans fall by at least 1.4 percentage points on average.

Will your credit score be damaged if you check it?

No, this is a common misunderstanding. You can check your own credit rating as often as you like with no impact. The only search footprints that can have an impact are those left by you applying for credit.

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What sort of things could change your credit score negatively?

A court judgment, insolvency or a credit default – sometimes just one of these things is enough for a lender to refuse credit. Building high balances on credit cards, missing payments and making multiple applications for new credit all suggest you might be getting into financial difficulties.

Additionally, having a limited record of making regular payments and managing credit responsibly gives lenders little indication of how reliable you are. This ‘credit invisibility’, which can contribute to financial exclusion, is something Experian has been tackling by working with credit providers, including utilities firms. It is also part of our work to bring rental payments into credit reports through the Rental Exchange in partnership with Big Issue Invest.

How can I raise my credit score?

Regular on-time payments to a range of accounts and relatively low balances. The age of your credit accounts is also a factor, with older accounts seen as more positive than any recently opened.

Opening a credit account and managing it well for several months can help build up credit history and improve your credit score; meeting required monthly payments and staying well below your credit limit.

Experian scores also recognise registering to vote as a sign of stability, so putting your name on to the electoral register can help lift your credit score too.

Here at Experian, our new free service, Experian Boost, lets people connect their current accounts to their Experian Credit Score so we can factor in regular payments to a wider range of accounts such as digital streaming services, savings and council tax. Boost, as the name suggests, will not make your score go down when you sign up.

Experian’s Coronavirus Help Hub is regularly updated with all the latest info you need to know, advice and tips for ways to help keep your finances healthy in these uncertain times. James Jones is on Twitter at @AskJames