Credit Score Importance Grows as Credit Tightens

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Equifax has predicted a good credit rating will become essential in 2008 as it sees almost a 50% rise in its credit check service.

One of the UK’s three credit scoring agencies has revealed consumers are starting to recognise a good rating is absolutely vital in today's economic climate.

The agency saw online credit checks numbers rise by 45% in January and February as people finally wake up to the fact that lenders will be less likely to offer money to those with a bead credit history.

Tim Moss, head of debt at moneysupermarket.com, says of this statistic: “People are really becoming aware of the importance of a good credit score.

“A fair or poor credit profile can make obtaining credit for everything from mobile phone contracts to mortgages much harder. Those that are accepted are likely to be offered a poorer rate.”

This tip couldn’t come at a better time as MoneyExpert.com research shows an 85% increase in homeowner loan applications in the quarter ending January 2008 compared to the quarter ending October 2007.

Also, it says debt problems have forced 6.5 million to consolidate their debts. More worryingly, the website found that 1.29 million have debts of more than £20,000.

The study shows 14% of people have moved debts to one lender in the past three years and it is younger people who are most likely to have consolidated – 23 per cent of 25 to 34-year-olds have moved all borrowing to one lender.

Sean Gardner, chief executive of MoneyExpert.com, says: “Anyone who is juggling a range of debts with money owed on credit cards, store cards and loans should be acting to get their debts under control.

“It is encouraging that so many people have taken action as you can make significant savings by moving all your debts to one place.

“With average standard credit card rates at 17.01% compared to average unsecured loan rates of 8.44% it is clear that borrowers can cut their monthly interest bill by moving.

“However it is crucial that borrowers see consolidation as a wake-up call to get debts under control. It shouldn’t be something you keep on doing simply to tide you over from year to year.”

Moneysupermarket.com has put together some tips to maintain a good credit score or to improve a fair or poor rating.

Moneysupermarket.com says: “You can't keep on top of your credit profile if you don't know what it is – make sure you get a check done at least annually with annualcreditreport.co.uk or with Experian and Equifax.

“If you find an error in your report, immediately write to the credit agency to ask for it to be corrected. If you don't get even minor mistakes changed, they could all count against you when a company uses your credit report to make a lending decision.

“Always try and make your payments on time – even the smallest ones. If you think you're unable to make a payment, contact your lender as soon as possible and ask them for advice on choosing the least damaging option.

“Without being able to find you on the Electoral Roll, any company will struggle to make a credit decision about you – so make sure you are on it.”

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