Mediocre credit rating without any debt...

[Greywarden]

I feel like a total idiot in my ignorance here but just don't know what to do.

I did an Experian credit check on a whim recently as DH and I have been discussing possibly getting a mortgage for a bigger home next year. I've never done a credit check before. To my shock I came out with a mediocre score - in the 700 region - and I just don't get why.

I have no debt - I've even paid off my student loan. I've never taken out a mortgage. I used to loan a car but made all the payments on time and ending up buying it outright in cash when the initial agreement finished because I liked it so much. I've never borrowed money for any other reason other than the student loan - I've never even used a credit card. I've never not paid a bill on time. I have dipped into my overdraft a few times but have always immediately cleared it using money from my savings. I've been in full time employment continually since the age of 21 (now mid-30s) so have always had a decent amount coming into my bank account each month like clockwork and have built up a fair bit in savings too.

What can be going on?

First, the credit check claims I have a debt of £700. I shouldn't as I've never taken this money out so am guessing some sort of fraud is involved. But if someone has taken out debt in my name, what the heck do I do about it? I have no idea where they've taken this loan out and don't know how to find out. It makes me worry that someone has been doing this for some time, which would explain damage to my credit score I guess.

Secondly, could my lack of history of borrowing or using a credit card actually be counting against me?

Thirdly, would the fact that I've sometimes spent more than I've earned (eg the odd month paying my share of a big family holiday) be screwing me over? I've always had enough savings to cover the shortfall at once though...

Again, really embarrassed to be ignorant but wondering if anyone can shed light on what might be happening here and how I can build my credit rating up.

Yes, not having had a mortgage or credit card will count against you.

The loan is more concerning. Would suggest you contact all the credit rating agencies to get it taken off your file, action fraud to report it, and the relevant lender to make clear that you are not the borrower.

Secondly, could my lack of history of borrowing or using a credit card actually be counting against me?

Yes. My granddad was very good with money, very careful, never use credit cards or loans etc and as a result has a terrible credit rating.
Get a credit card and shift some debit card spending onto it and pay it off in full each month. That's what my mortgage broker advised when I was buying my flat - lenders want to see a history of you having access to credit and using it sensibly.

Right thanks both. I will apply for my first credit card I guess. Hate the idea of using one when I don't need to but I can see the logic of needing to build a reputation.

Not so confident in addressing the fraud issue - how do I even find out who the lender is?

Feeling like a ridiculous child who has lived boringly and sensibly (ish) and always been lucky enough not to need to borrow to live, and now suddenly realises I've screwed up...

OP you haven’t screwed up, honestly, credit scores are a made up number the different ratings agencies use to work out what credit you might be approved for but it’s by no means an exact science. They all use different scoring methods and numbers and mortgage lenders don’t actually look at a number, they look at your income:outgoings and work out how much you can afford to borrow. The rate you get offered tends to be down to your loan to value rather than credit-worthiness so long as you don’t have any history of defaulting on debt payments.

if you’re worried go and see a mortgage broker. They know the market and which lenders are most likely to lend to you.

Nope don't feel like that. I was in such a similar situation - I was careful with money and not having a credit card was part of being careful. I didn't get how that could possibly be held against me until my mortgage guy explained that it's just the lack of evidence that results in. It's asking the banks to have to make a guess about what you're like with credit, rather than them having a paper trail showing how responsible you are.

Do you have a phone contract? That could possibly be the £700. Mine shows as a loan, as effectively that what it is. Just a thought

I check my score with Experian and Clearscore. Clearscore gives more info, maybe check on there and see if it tells you the lender, but for that amount my guess would be phone contract or similar x

There are other reasons to use a credit card that you may find useful. I do all of my shopping on mine to earn points. Last years points got my partner and I a trip to Germany flights and hotel for a week cost a total of £2 as we were able to use points.

You need to change your mindsets about credit cards. Why would you use an overdraft, that banks see as a bad thing and costs you money, when you can use a credit card, which is free if you pay it off in full every month?

Credit cards can actually earn you money via cashback, the banks see their use as responsible money management and gives you quite a few other benefits such as consumer protection, it makes it easier and cheaper to hire a car, especially abroad. As you have also noticed, it also gives you a credit history, so will make it easier to get a mortgage.

You need to get a fully copy of the report so you can see the lender and payment history. Are you sure it's not a utility as they often report to the agencies.

Credit reports are a way of lenders knowing if you can manage your finances. If you never have any borrowing (loans or credit cards) then it doesn't give them an idea if you can responsibly manage debt or not. This impacts your credit score, not because you can't manage money but because there is no information for them to use to make a judgement.

The advice from my son's mortgage broker when we made an initial enquiry a year before he bought his first house was to get a credit card asap and spend a little on it each month but make sure to pay it off in full each month too. This raises your credit score significantly as it demonstrates you can manage credit/debt.

You can approach the credit agency direct to make an enquiry about the unknown £700 borrowing.

Make sure you’re in the electoral roll too, as this will help your credit score.

Having a credit card is essential in my opinion. I pay for everything on it to get points and vouchers, and to get protection if something goes wrong.

Thanks again everyone. Really appreciate it - I feel more confident about what to do. And yes have worked out the one debt showing up is my phone contract! Totally forgot about that as it's the first time I got an expensive one involving paying the phone off before - had always previously bought a cheap phone outright and paid a small amount for a sim-only contract, stinger that I am (and because I'm clumsy, this has always meant years of a cracked phone screen 😆).

I found out recently that if you get a credit card ask for the maximum credit limit, but don't spend up to the limit and definitely pay it off every month in full and you get a better score. It shows you are not living beyond your means and can pay back what you spend.

• Make sure you are on the electoral register
• As other have said having a credit card that you pay off every month helps your credit score
• Make sure your current address is correct on your credit file
• You need to urgently contact the main credit score companies to dispute the £700 debt. I assume you can see on the report what the debt is about (loan? phone contract? store purchase?) as well so you should contact the company that the debt is with to let them know that it is fraudulent
• I would also get a subscription with Equifax or Experian so you can keep an eye on your credit file and get regular updates from them if anything changes
• Talk to CIFAS as well about the fraud. https://www.cifas.org.uk . They can also put a notice on your file that you have been a victim of fraud and that any lenders should make sure they do extra identity checks before giving credit.

Get a credit card and set up a direct debit to pay it in full each month. Spend something on it everyone, even a small amount. On top of that sign up for some sort of phone contract even a sim free cheap one and again pay by direct debit each month. It will gradually improve. Most young people have the same problem no debt but have failed to show they can be relied on to pay it back regularly. Crazy I know!

also just to ad to PP’s don’t max out your credit card. Think it should be about 70% otherwise that’s looked at negatively as well

Credit cards when managed are quite useful tools. As well as building credit score you get protection (section 75 if you want to do some more reading) when buying things between £100 and £30000 even if only £1 of the total was placed on the credit card. Putting the deposit for a kitchen on a credit card for example could prove very beneficial if you then went on to have issues with the kitchen.

We've had credit cards since leaving university, there's a direct debit set up to clear the balance in full at the end of every month. We initially used it for the food shop each week to build a credit score but now we use it for online or large purchase for the credit protection.

We kept our credit cards with our old bank after moving our current account and another reason for keeping them was access to payment methods if our main bank had issues. We switched not long after a few banks had IT failures. For a while it meant our debit and credit cards were with different providers - one visa the other MasterCard which also would give us options if visa or MasterCard went down but they've since switched and now they are both the same but it's not something we think is worth switching for.

Yes you need credit in your own name so lenders can see how responsible you are and to build up credit. I for a long time always had a credit card on my husbands account , he always financed our cars , bought our phones etc. It’s only in the last few years I’ve had my own credit card to build up my rating. It started off as £1000 and has now been increased to £6500 as I pay it off every month

MSE credit checking site will show you which cards you've been preapproved for. There's very likely to be something. Apply, and if you're really uncomfortable with credit you can start slowly. Use it next time you pop out for a pint of milk, or buy a new top online, and pay it off as soon as you can. The transaction records will all start to build up.

I’m the same op. I’ve been overly cautious with finances so never had a credit card but can see how it would be ‘sensible’ (scares the shit out of me after being raised in debt).

I had "unpaid bill" with one of phone providers. I contacted them and they removed it from my file. It took them a month or so. Clearsore is rubbish, is missing entries for me such as an existing mortgage or phone Co tract. I suspect they are going under.
My bank, Santander, when I was remortgaging last summer told me that they don't really use credit score but affordability formula.

We have a cash back credit card and buy all groceries on it and pay it in full each month. Help us to keep track of monthly grocery spending as it’s a total each month, plus we get a bonus cash back every six months. The rule of thumb I think is to keep your balance below 20% of your available credit. (So £1000 if limit is £5k) for the majority of the time. If we book a big holiday on it that takes it over 20% but that’s obviously not every month.