Fundamentally, your credit rating is simply a reflection of how well you manage your money.  While the term “credit score” does infer debt repayments, these days, your credit score can be a broader reflection of how you manage your money more generally.

It’s pretty near impossible to opt out of having a credit score

If you’re familiar with data protection, you will be aware that you have a large degree of control over what information companies hold about you and with whom they can share it and it is true that, in principle, you can refuse to share your data with any company or to decline to give your permission for them to pass it on to third parties such as credit reference agencies.  In practice, however, if you do, then you have to accept the very real likelihood that companies will refuse to do business with you.  This could cause you issues not only with getting credit products such as mortgages but also in day-to-day matters such as getting a mobile phone contract.

You actually have more than one credit score, but they all work in similar ways

In the UK there are three major credit reference agencies (Equifax, Experian and CallCredit), each of which has their own system of working.  Having said that, the basic ideas underpinning these services are much the same.  They work with companies such as loan providers, providers of other forms of credit (such as store credit) and providers of contracts for services (everything from mobile phone contracts to gym contracts) and over time they build up a picture of how you manage your money, i.e. how responsible you are with it and how likely you are to repay credit or fulfil a contract.

You have a fair degree of control over your credit score

Even though it’s practically impossible to opt out of having one, you can exercise a fair degree of control over your credit record and it often makes good sense to do so.  You have the right to see your credit record and although there is generally a small cost attached to this, it can be to your advantage to pay it once a year or so to see where you stand even if you are not planning on applying for credit any time in the near future and if you are planning on applying for credit, particularly large-scale credit such as a mortgage, then it is usually a very good idea to double check the information a potential lender will see about you to ensure that it is all present and correct and to see what steps, if any, you can/need to take to improve it.

Steps to improve your credit record

Make sure all information held on file is current, complete and consistent.

Do all companies have the same address on file for you?  Even if you haven’t moved, it may still be possible for the same address to appear in different formats, for example Flat 4F and Flat F4.  You also want to be on the electoral roll at the same address as you use for your bank accounts, loans and so forth.

HintThere are two versions of the electoral roll, the open register and the full version.  The open register is made available to anyone to buy (e.g. for marketing purposes) and the full version, which is only available to certain authorities (essentially the government, the police and credit-reference agencies).  You can opt out of the open register if you have concerns about being deluged by marketing material.

Make sure all details are correct – mistakes do happen.

Remember you are judged by the company you keep – in other words, if you hold a financial product jointly with someone else, their behaviour can influence how you are perceived.  This can have both advantages and disadvantages.

Pay off and close down any unused credit lines

For example, if you’ve been tempted to take out a credit card/store card for a special offer and have stopped using it since then, formally close it rather than just leaving it gathering dust physically and on your credit record.

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