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What do points make?

Well according to the late Sir Bruce Forsyth the answer would have been "Prizes" but today points can be really important if you want to apply for a mortgage (or any unsecured borrowing such as a credit card or a car loan).

If you watch commercial TV you will see numerous adverts relating to credit scores and most of them will take money from you to keep you informed of your personal details.

Lenders not only want to know your income amount but they want to build a picture of you to ascertain your credit worthiness before they decide whether to lend you money or not. The main credit reference agency is Experian and that is the one most used by lenders, closely followed by Equifax, and sometimes by TransUnion (previously known as Callcredit). Did you know that a credit reference company score is unlikely to be the same as that produced by any lender? The credit reference agencies use the information on their file and nothing else. So, if your only credit agreement is a credit card with a limit of £500,00 and you make all the payments on time, you will receive a high score.

Now apply for a loan or mortgage and the lender will take account of all the questions on the application form and that is where the difference lies. For example – are you paid monthly or weekly, into a bank account or in cash? How long have you been with the same employer and what is your job title. How long have you been at your current address and how contactable are you?

If you have just moved house to start a new job your score will be reduced. Any late payments showing on your credit report will also have an adverse effect on your score.

All financial commitments, whether recorded with a credit refence agency or not should be paid by direct debit or standing order. That way, the correct amount is paid on the correct day of the month and your score will go up, not down.

We are all entitled to a free ‘statutory report’ from every credit refence agency once every twelve months. Extra statutory reports can be purchased for very little money in between or you can sign up for a full report each month (first one is usually free) for about £15.00 a month. When you see your report you will see all credit contracts over the last 6 years and your payment history, you will see who you are associated with (even if you have since moved on) and addresses that you have been linked to. It is a very useful document that you should review at least once a year because any errors can cause a loan or mortgage application to be declined and while you are sorting the error out you may lose the property that you want to buy.

There is no magic number of points that you need but the more points you have the more likely you are to have success with your applications and even lower interest rates.

Remember – prevention is better than cure!


Ancojada Limited trading is not authorised or regulated to provide financial advice.

All financial advice is provided by other regulated businesses.

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