Your credit score can be a deciding factor when taking out credit, such as a credit card, mortgage, or loan, and even when applying for a cell phone or power contract.
Planning for your financial future – whether it’s to better manage your debt, increase your purchasing power, or commit to a large loan or mortgage – can take the pressure off your money and help you achieve some of your life goals.
This guide explains why checking your credit report and rating regularly can help you better plan for your financial future, and why new rule changes can make it more difficult to successfully apply for a mortgage.
What Can Your Credit Report Tell You?
First, your credit report shows you what lenders are most likely to see when they review your application for credit cards, loans, mortgages, and most other financial products.
If you’ve had a missed payment in the past six years or so, it will show up on your credit report. Likewise, if you have a credit card and have paid off the balance every month, that will also be there.
These factors contribute to your overall credit score, but it should be noted that how your credit score is calculated depends on the credit reference agency’s calculation methods.
Experian CreditExpert is the UK’s largest and most well-known credit reference agency, so it’s more likely that a lender you’ve completed an application with will check your Experian report to make their decision.
Your credit report will also display information such as your voters list details, all court records including county court judgments and bankruptcy information, and any fraud information.
It will also show which banks and lenders have reviewed your credit report after you applied.
Please note that your credit report will not show any information on municipal taxes, driving penalties, medical history, or anything related to your salary and savings.
What is the Mortgage Market Review (MMR)?
The Mortgage Market Review (MMR) represents a huge shift in the mortgage market in the way applications are assessed.
Under the new MMR rules, mortgage lenders will have to do more rigorous checks on the affordability of mortgage applicants.
This includes questions about the client’s lifestyle, as well as income.
If you apply for a mortgage now, your credit card expenses and monthly expenses, such as gym and TV subscriptions, could be a deciding factor for mortgage approval.
However, it is not just the mortgage market that is scrutinized by the Financial Conduct Authority (FCA).
The FCA has also proposed a review of the credit card industry following concerns that many credit card holders have revolving credit card debt.
Many of the new changes and regulations will aim to make lenders more responsible, in order to treat customers fairly.
This could mean that getting a credit card, mortgage, or loan could be more difficult or more scrutinized than before.
By regularly checking your credit report and staying on top of the areas of your finances that you need to improve, you can start planning your financial future accordingly.
Using your credit report and score
You may only want to check your credit report and score once, but you can use it to your advantage if you check it regularly.
For example, Experian CreditExpert offers its members tips and advice to help improve customer scores.