Created by: Katherine Locke | 10 September 2018

Poor Credit Score? Don’t Panic!

So, you bit the bullet and found out your Credit Score rating and, yikes, it turns out you have a Poor or even Very Poor credit score.  This can be an enormous shock, but don’t panic. There is a lot you can do to improve a poor credit score or even to decide if it matters.  If you have just found out you have a poor credit score, what do you next?

Firstly, it is interesting to know exactly how Credit Reference Agencies (CRA’s) assess your credit score.  There are three leading agencies in the UK – these are Experian, TransUnion and Equifax, and they all use different systems to assess an individual’s credit score.  However, they usually come up with broadly similar results.

Credit Reference Agencies assess your credit score using the following information:

  • Electoral Roll – if you are registered and how long you have been at your current address.  Naturally, lenders like people who stay in one place and have been on the electoral register for some time.
  • Account Data – banks, building societies and even utility companies share your account data with Credit Reference Agencies. Your credit cards, mortgage repayments and mobile phone contract details will also be shared. Any store cards or loans will be on there too. In fact, any financial products you have now or in the past will show up on your credit score.
  • Court Records – and County Court Judgements (CCJ’s), previous bankruptcy records or and court debt record (such as child maintenance for example), will show up on your credit score.
  • How often your address appears in a search – there will be a record of how many times your address has been searched by lenders (including utility companies) and this will be on your file.

These four search criteria form the basis of any credit score, regardless of the agency involved.

It is important to remember that if your Credit Score is poor, you aren’t automatically put on a Blacklist for all to see!  It really only matters if you are trying to get more credit in the form of a bank loan for example, or a mortgage. Some people have a very poor credit rating because they have had no credit in the past and therefore no credit repayment history on which to be assessed (go figure).  

A poor credit rating may also be due to misinformation on file or your name being attached to an address or person with a poor credit rating (even someone who lived at the same address before you).  This might be someone you have never even met!

A poor credit score doesn’t mean the end of the world.  Here are three things you can do today to help improve your score:

  • Build a good credit history.  Start with a credit card (and there are some around specifically aimed at people with poor credit) with a small borrowing limit.  Use it sparingly but make regular payments each month to build up a good credit history.
  • Check your credit score every month and tackle any errors immediately.  This will also enable you to see if you are building a better credit history.  You can check your credit score HERE for free.
  • Don’t keep applying for loans or credit cards that you know will turn you down.  This will massively negatively impact your score.

Lastly, take a deep breath and get some help to manage your finances in the future.  Most people will experience a financial hiccup at some point in their lives – whether it is student recklessness, a failed business venture or an unexpected illness.  It is possible to repair a bad credit score and remember most agencies will only look at the past six years (and many just the most recent year or two), so proper financial planning and support can turn your credit history around.

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