Credit Scores Explained

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Landlords rely on credit scores, among other things, when selecting and verifying their new tenants. This article on credit scores gives an insight into what’s involved when we check our personal credit scores, and what we all need to do to make sure we get a good score.

This article gives an insight into what landlords and agents should to be looking for when they do a credit check.

My Personal Credit Score

Have you recently paid a credit reference agency to get your credit score checked? Or maybe you’re having your credit score checked by a specific lender, such as a bank or mobile contract provider. You’re probably wondering what makes up and what can impact your credit score.

So, what do credit reference agencies look at when calculating your credit score?

When checking your score, credit agencies will take a wide range of different factors into account. These include information that has been directly provided by you, information the lender may have about you, as well as any information they lender may obtain from other organisations.

Keep in mind that different lenders are looking for different things, so you may get scored differently when you apply to a different one.

What can impact on your credit score?

A large number of things can have an impact on your credit score. First and foremost, having high levels of debt can have a significant effect on the result of a credit check. There are numerous other important factors, such as not being registered on the electoral roll at your current address and missing bill payments, which remains on file for six years.

‘Financial association’ is another big one. This means sharing assets, an account or credit (e.g. mortgages) with someone who has a poor financial record.

It might come as a surprise to you, but even factors like moving home frequently and not having a home phone number can have a negative effect on your credit score. This is due to the fact that some lenders might consider these factors as signs of an unstable living situation.

Improving your credit score

If you have a poor credit rating, there are a number of things you can do to try and improve your it. These include:

• Paying all your bills on time
• Getting registered on your electoral roll
• Meeting monthly minimum payments on credit cards
• Cancelling unused credit cards
• Alerting your credit reference agency to any mistakes on your credit report as soon as possible
• Applying to be disassociated financially with another individual
• Limiting the amount of credit applications you make
• Keeping the balance on your credit card accounts low: borrowing less than 25% of your balance shows lenders you don’t need to use credit too often
• Regularly checking for suspicious activity on your credit report.

At the end of the day, the lender still has the final say about whether or not to give you credit and how much they will charge for it. For helpful tips on understanding your credit score and how to manage it, check out the following guide to credit scores from Sainsbury’s Bank.

This handy visual guide demonstrates how financial organisations, lenders and utility companies usually use credit scores to determine if your application will be approved.

Infographic Courtesy of: Sainsbury’s Bank

See also: 20 Point Checklist when screening new tenants

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