Less Than Perfect Credit Score When You Are Cash-Rich

Posted by Kelly Luff in Credit Reports on 8 March 2017 - Kelly is a Marketing Executive at checkmyfile

You might tick all the boxes in terms of financial stability – you may have paid off your mortgage, own your own car outright and have a hefty savings and pension pot. So why is your credit score not 1000 out of 1000?

Are You a 'Low' or 'High' Credit Risk?

Credit scores are used by lenders to decide your ‘risk’ to them before they lend you money. So if you’ve got savings coming out of your ears, a good income and don’t owe anyone money, surely they’d deem you a low risk and all want to lend to you, right?

Unfortunately this isn’t always the case. Certainly, if you ask your bank for a loan and you’ve always banked and saved with them, they’ll be more than aware of your financial standing and reliability. The difficulty is when you decide to apply for what might be a more attractive offer and they then request your credit report to decide if you are a ‘good’ or ‘bad’ risk.

At this point, the lender will view your credit history for the last 6 years. This might include your credit card debt, mortgage, loans or mobile phone contract, along with other data such as Electoral Roll or court records.

What it doesn’t show is your bank balance (unless you are using your overdraft), your savings and ISAs or your pension pot. It also won’t show your mortgage if it’s been paid off and closed for more than 6 years.

So, we often hear from customers with a lot of money in the bank and a good salary, but an average credit score and they all ask the same question - why?

Put simply, because your credit score is based on how you manage your debt, you need to have debt on your credit report to show how you repay it. If there is nothing recorded on your credit file, there is nothing for the lender to base their assessment. And if they can’t see whether you are able to repay £15 a month for your mobile phone, how can they decide whether to risk you repaying them £1,200 a month on a mortgage?

You may only buy something if you can afford to pay in cash, and hate the thought of borrowing from banks, but this lack of credit utilisation can impact you when you do need to borrow money for something like a mortgage and that is often reflected in your credit score.

Lenders don't only use your credit report to accept or decline an application, so elements such as employment, homeownership and salary will often be taken into account, but when you check your credit score, these components won't have been used to calculate it.

How to Build & Maintain Your Credit History

Thin credit files tend to be the affliction of those at either the start or the end of the credit-using period of their lives. Whether you simply aren’t old enough to have built up a credit history, or no longer have the need to borrow because you are cash-rich, the same issues surrounding a lack of history can affect you.

For this reason, many consumers keep their toes dipped into the credit-using world. Whether it’s taking advantage of an interest free period offer on your sofa, or keeping a credit card ticking over by putting your petrol on it and paying it off every month, there are ways to keep using credit so that your credit report remains healthy.

These are ways in which credit can be utilised without it ever costing you an additional penny, so it may be worth making the most of these to ensure that there is something being reported each month. What isn’t recommended is taking any old credit out to build your history – borrowing using payday loans for instance can actually harm how lenders might judge you, as they cannot be sure that you are good at managing money if you use short-term credit.

Having some credit accounts reported each month certainly helps to build your credit history (as long as you ensure you repay on time), and making sure that you stay on the Electoral Roll can also help to keep your credit score in good shape.

Check Your Credit Report from 4 Data Sources

30 Day Free Trial

How To Remove Negative Markers on Your Credit Report

Your credit report is intended to show potential lenders, employers, landlords (and occasionally insurance providers) an accurate representation of what you are like when it comes to borrowing (and repaying) money and managing other credit agreements. Think of it as a CV of your borrowing history that gets updated on your behalf.

Published on 21 Apr 2018 by Jamie Mackenzie Smith

Full Article

Why Does My Credit File Say I'm Dead?

For many people, it comes as a shock when they are informed that they are, regrettably, dead. In fact, it can be a downright inconvenience when you’re trying to apply for credit, but end up getting turned down because you’ve been accidentally listed on the Death Register.

Published on 11 Apr 2018 by Tom Blandford

Full Article

Will checking my credit report affect my credit score

Does checking your credit report affect your credit score? This is a question we are often asked, as more and more consumers regularly access their credit history to check for errors. This seems to be based on the popular misconception that search footprints damage your score, and as checking your credit file leaves a footprint, checking your report must harm your score. However, this is far from the truth.

Published on 5 Apr 2018 by Kelly Luff

Full Article

What are address links and why are they on my file

At first the sheer amount of historic information held by Credit Reference Agencies can seem daunting when seen for the first time. This is certainly true for address links, which show all current and historic addresses recorded for you, as well as additional addresses that lenders think may be linked to you. But you can rest easy, because they're nothing to fear.

Published on 24 Mar 2018 by George Coburn

Full Article

How to Change Wrong Information on Your Credit Report

Making sure you have the right information on your credit report is essential, not just if you want to apply for any form of finance, but also because potential landlords and employers may want to check your information as well. But even if you think you’ve maintained a perfect credit history, the number of different sources of data that the UK’s four Credit Reference Agencies draw from leaves plenty of room for errors.

Published on 19 Mar 2018 by Katherine Cornell

Full Article

How long is your credit information really held for

When applying for credit, the majority of lenders will search for your credit files with the Credit Reference Agencies to determine whether they will be willing to lend to you. Any information obtained from the agencies can then be used in the lender’s evaluation of your creditworthiness.

Published on 15 Mar 2018 by Tom Blandford

Full Article

What Credit Searches Mean

One of the most commonly misunderstood aspects of credit files are the credit search footprints left on your report whenever someone accesses your file. One popular misconception is that ‘too many credit searches will put off potential lenders, but the truth is you’d have to make an alarmingly large number of applications for that to happen.

Published on 9 Mar 2018 by Kirstie Brown

Full Article

Arrangement to Pay markers

Have you seen an ‘AR’ mark on your credit file? Chances are you might glance at the letters and assume that they relate to payment arrears. However, on many credit file providers’ reports an ‘AR’ appearing on the payment history means an arrangement to pay has been recorded on the account.

Published on 20 Feb 2018 by Ben Ryland

Full Article

Credit search footprints left by comparison sites

If you’re one of the millions of people who use comparison websites to make sure you’re getting the most competitive insurance quotes, you might have noticed that every time you use a comparison site, you get an increased number of searches on your credit report.

Published on 16 Feb 2018 by Arron Dickens

Full Article

What doesn’t appear on your credit report?

People are often just as surprised at what isn’t reported on their credit file as what is. It can be a bit of a shock when they finally do come to check their report and find that a lot of their spending and earning has gone largely unheralded.

Published on 19 Jan 2018 by Tom Blandford

Full Article
keyboard_arrow_left

keyboard_arrow_right

We have loads of great customer reviews