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The things you never knew you were credit checked for

Thousands of Brits are oblivious to when they’re being credit checked, according to a study from Amigo.

From overdraft extensions to mobile phone contracts, thousands of Brits across the UK are completely unaware that they are being silently judged by a number on a screen.

Monthly insurance premium instalments, monthly gas direct debits and monthly electricity direct debits are among the top things consumers are not aware they’ll be credit checked for – with more than half of the population admitting that they weren’t aware big brother was checking out their trustworthiness.

More seriously, one in five people (22 per cent) aren’t aware that they’re credit checked when applying for a mortgage, meaning they may not only be declined but they could actually damage their credit score even more, making finding a mortgage acceptance even harder. Other financial transactions people didn’t know were credit checked included applying for a personal loan (24 per cent) and applying for a credit card (19per cent).

Below is a list of the top ten financial transaction that people DIDN’T KNOW they were being credit checked for

  1. Monthly insurance instalments - 63%
  2. Gas direct debit payment - 56%
  3. Electricity direct debit payment - 56%
  4. Flat rental - 50%
  5. Mobile phone monthly contract - 37%
  6. Overdraft extension - 49%
  7. Store cards - 42%
  8. Retail finance - 37%
  9. Car finance - 27%
  10. Personal loan - 24%

A damaged credit score severely impacts an individual’s ability to borrow from a lender, especially a mortgage. If your credit score is poor, it indicates that you are less trustworthy when it comes to paying back a loan.

Every individual in the UK has a credit score, yet only 12% of people recall knowing their exact rating. This means many could be in for a nasty shock when they apply for a loan, credit card or mortgage.

What’s worse, if you apply for a credit card, loan or mortgage and are declined, that process can actually damage your credit score even further.

There are three principal reference agencies which allow people to check their score before applying for credit including; Equifax, Experian and Callcredit.

Glen Crawford, CEO at Amigo Loans, which commissioned the study said: Thousands of people are completely oblivious to the fact big institutions are checking their trustworthiness. The days when you would only be checked for a mortgage or a loan are long gone. What’s really worrying is that people could be inadvertently destroying their own credit score, and as a result may be closing the door on life dreams like home ownership.

"The solution to this problem lies in education and we all have a role to play. Lenders, the government, the industry and even the media are all responsible players in raising the awareness of the importance of looking after you credit score. While many banks use your credit score as the key benchmark for your trustworthiness, at Amigo we always look deeper than just the number on the computer screen. Only by holding interviews and delving deeper can we ensure the true measure of trustworthiness of our customers – something that we believe all financial institutions should be doing."

While at Amigo, we do more than just check a number on a computer, it is still incredibly important to give your credit score the respect it deserves. Amigo loans has collated top tips for improving your credit score:

  1. Make sure you are on the electoral register. Lenders use the electoral register to help fight identity fraud and confirm a person is who they say they are and that they reside at that address.
  2. Pay bills on time or ahead of schedule, a good credit score needs to be built up over time – lenders will look favourably on this.
  3. If you notice anything on your credit report that could be incorrect or you think you might be the victim of identity fraud, i.e. you think someone has applied for credit in your name, contact the credit reference agency who will work with the lender to try and resolve the issue.
  4. Avoid keeping a high balance on your credit card. Lenders may view it as excessive debt and be concerned about your ability to repay.
  5. Only apply for products when you really need them – applying for more than four forms of credit in a year can lower your credit score.
  6. Close down out of date credit cards and make sure you cancel old agreements, such as store cards you never use, as these will still appear on your file. Lenders may be wary about the potential size of your debt.
  7. Sever old financial relationships if you are divorced or separated, making sure your former partner’s details are removed from any joint accounts. The credit history of all financial associations such as a spouse or anyone else you have a joint bank account or loan with can affect your credit rating.

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