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

The Advantages of a Multi-Agency Credit Report

These days your Credit Report can be checked for any number of reasons throughout the year, including background checks during job applications, landlord checks and even from insurance or utility providers when you shop around for quotes.

Published on 17 May 2019 by Paul Anderson Riley

Full Article

What Lenders Want To See On Your Credit Report

Your Credit Report holds a huge amount of information about you and your past relationship with credit. It’s collated from a wide variety of sources, is always changing and plays a major part in any lending decision - but you shouldn’t be afraid of what it shows.

Published on 2 May 2019 by Sam Griffin

Full Article

What Credit Searches Mean

One of the most commonly misunderstood aspects of Credit Reports are the credit Search Footprints left on your report whenever someone accesses your file.

Published on 25 Apr 2019 by Kirstie Day

Full Article

How to dispute an account error on your report

Whether you’ve been turned down for credit in the past and have checked your Credit Report to make sure there’s nothing there harming your chances, you’re checking ahead of making an application, or you’re just looking to make sure everything is as it should be, there’s never a good time to find a mistake with the information on your report.

Published on 17 Apr 2019 by Kelly Luff

Full Article

Your Rights When Cancelling a New Credit Agreement

For most people applying for credit the main concern is whether or not they will be actually get accepted. But occasionally a change in circumstances (or even just a little time to reflect on your purchase) means that a bigger concern might be whether you can change your mind and withdraw from a credit agreement (be it a credit card, personal loan or other credit facility) after it’s been granted, potentially preventing you from taking on additional financial responsibility that you no longer want or need.

Published on 18 Mar 2019 by Tom Magor

Full Article

Creditworthiness and Affordability – Which is Which

When reading the small print on most applications for credit, you’ve probably noticed two words regularly popping up: Creditworthiness and Affordability. Both of these measures are used by a vast majority of lenders when assessing your application, so understanding what each one means goes a long way to explaining why you may or may not be accepted for credit.

Published on 22 Feb 2019 by Ben Tumilty

Full Article

What Information Is On My Credit Report?

If you’ve ever taken out a loan, credit card, or other form of finance, you’ll know that the difference between acceptance and rejection relies heavily on the outcome of what the lender finds when it checks your Credit Report.

Published on 4 Jan 2019 by Paul Anderson-Riley

Full Article

Can Right to Erasure Get Rid of Bad Credit History?

General Data Protection Regulation (GDPR for short) was introduced on 25 May 2018 and unless you’ve managed to avoid the internet and checking your emails completely for the past year, you’re likely to have been bombarded with messages from nervous sounding websites updating their data policies.

Published on 3 Jan 2019 by Jamie Mackenzie Smith

Full Article

Why Searches Can’t Be Removed From Your Credit Report

The Searches section of your Credit Report shows you who has accessed the information on your Credit Report within the last couple of years. This effectively acts as a log of when you’ve checked your own Report, as well as a record of lenders checking as a result of applications for credit in your name. You’re also likely to see searches relating to prospective employers, landlords, insurance companies and other identity checks.

Published on 2 Jan 2019 by Beth Jennings

Full Article

How To Take Out Credit When Overseas In The Armed Forces

It’s no secret that the number of the UK’s active military personnel is set to decline further between now and 2020, but of the 145,000 UK Regular Forces across the Army, Navy and Air Force in 2018, as many as 18,500 served overseas during that time. With the recent news that the Army will accept recruits from commonwealth countries as well, a further portion of our armed forces is likely to be based overseas in the coming years.

Published on 27 Dec 2018 by Jamie Mackenzie Smith

Full Article
keyboard_arrow_left

keyboard_arrow_right

We are rated number 1 for customer service on