A Comprehensive Guide to Your CREDIT REPORT & CREDIT SCORING

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1 A Comprehensive Guide to Your CREDIT REPORT & CREDIT SCORING OVERVIEW AND INTRODUCTION Most people today realise the importance of having and maintaining good credit. They also may have heard certain terms used in conjunction with credit and credit reports. Terms like credit rating, or credit score are used a lot when someone is looking to borrow money from a bank or lender. However, many of us may not fully understand the terminology used, or what makes up our credit scores and how to improve them. This comprehensive guide is to help remedy that. With all the confusion and mystery surrounding credit reports, credit scores and credit scoring, we wanted to create a guide that explains your credit report and credit scoring, in simple, yet detailed terms. If someone has experienced poor credit or had financial issues in the past, this guide will help them understand the steps they can take to improve their credit score. Having a low or poor credit score can cost you thousands of pounds due to the fact you may receive a higher interest rate, which costs you more in the end. Also, having a poor credit score could see your application for a much needed loan be denied. Did We Write This Guide How To Use This Guide The guide is set-up to be read from the beginning to the end in succession, beginning with credit reports and what components make up your credit report, to what is a credit score and what factors are used to come up with this magical number. We will also guide you through ways to improve your credit score, and how to correct errors should there be any on your credit history. For the course of this guide, credit report and credit history will be used synonymously. As will as credit bureaus, and credit reference agency or agencies.

2 Overview CREDIT BUREAUS We cannot discuss credit history and credit scoring without starting at the beginning, and showing a lineage of how it all, meaning credit reports, comes to be. This is a simple, and I do mean simple, way to show how your credit history/report is created, and also your credit score. a) You apply for a loan. b) A bank or lender in their underwriting process, reviews your credit history and credit score. History & Credit Report c) Wait, you don't have a credit history yet, so one must be created. Much of the information you included on your loan application will be used to create a file on you. All that data is what is sent to the credit bureaus. They are the ones that actually create your credit report. d) By the lender reviewing your credit history, or lack there of, a footprint or inquiry is made, showing the lender reviewed your credit report. e) Information from the lender that they have reported, is then used by the credit bureaus (more on them in a moment) to create a credit report on you. f) We will make the assumption your loan is approved, and you begin making payments. g) The bank or lender then reports how you are paying the account to the credit bureaus on a regular (monthly) basis. h) Using this payment history, as well as other information and data, a credit score is created. You now have a credit history and a credit score. As you will see in reading this guide, it is a bit more complicated than this, however, this does give you a basic overview.

3 What Is a Credit Bureau? Throughout the world in various countries, there are credit bureaus, or something similar that gathers data and information on borrowers and consumers, and makes a repository of this information available to banks and lenders to review. The banks, lenders, and in some instances insurance companies, use this information in making decisions as to if they will grant a loan, or insurance policy. The process of deciding as to if a loan will be granted or denied is termed underwriting. Credit bureaus themselves do not decide if a loan is approved or denied, they are merely providing the details and information they have gathered, and has been reported to them, on individuals, and sometimes companies, that is then reviewed by a lender or insurer, to make a decision regarding that individual's application. Credit bureaus can also be known as consumer reporting agencies. It is important to know that everything on your credit history stays there for a period of six (6) years. After that time it is to drop off, if an account does not drop off after that period of time, you can request it be removed. Credit Bureaus In The UK Here in the UK we have three (3) credit bureaus: As mentioned, these credit bureaus do not grant or approve loans or provide insurance, they are simply the ones that gather the various information and details on people, and then allow access to this information to banks and lenders, and anyone you give permission to, such as some insurance companies and even some employers, if they use credit as a part of their hiring process.

4 Information/Details On Your Credit Report Your credit report/history contains the following information and details about you: Your name Your address and in some instances, your previous address. Your date of birth The accounts you have that are reported to the credit bureaus. It must be noted here that not all lenders or creditors report all accounts to all three credit bureaus. Some smaller lenders may only report to one of the credit reporting agencies, and in some instances a lender may not report the account at all to any of the credit bureaus. It is at the lender's discretion as to if they report an account or not, however, the credit bureaus do solicit lenders requesting they do report the accounts, and the benefits of doing so. How the accounts have been paid, your payment history. The type of accounts you have, either a revolving account, such as a credit card, a mortgage, etc. There can be a public records section which may show any CCJ's you may have, or if you have been bankrupt. Your credit score. A score assigned to you based on various factors which helps lenders determine how well you may repay a loan. Credit inquiries or footprints. These show who has looked at your credit history. Each time a lender or someone reviews your credit report, a footprint showing the date and who it was that viewed your credit history is reported on your credit report. These stay on your credit report for a period of two (2) years. If you are on the Electoral Roll. Any Notices of Correction or Disassociations you may have added. Any fraud warnings that may have been issued if you were a victim of identity theft, and filed a report through CIFAS. Any accounts that you may have co-signed for or guaranteed.

5 Who Can View Your Credit History Not just anyone can view your credit history, you have to give them permission to do so. When you apply for a loan, in the application itself will be a notice advising you the lender may review your credit history as a part of making a decision on granting the loan. By completing the application, you are giving that consent to the lender to look at your credit history. If an insurance company, or even a potential employer, use credit history as a part of the hiring process or underwriting an insurance policy, they must obtain your permission to review your credit report. Later on we will be discussing in more detail, other areas outside of lending where someone may want to review your credit history and credit score. You can view your own credit report as well. All three credit bureaus will allow you a copy of your statutory credit report for a fee of 2. You can also obtain a free copy of your credit history at Clear Score. How Often Should You Review Your Credit Report? Deciding how often to review your credit report can be determined in two ways, one is to just review it annually, or if you are very credit active, or have had any identity theft or accounts used in a fraudulent manner, you may wish to review your credit on a more regular basis. The reasoning for reviewing your credit report is to ensure the information reported is accurate. Any errors could be costing you money by reducing your credit score. So what can you do if there are any errors or omissions. Correcting Errors If you find an error on your credit report you have two ways to have this error corrected. One way is to contact the creditor that is reporting the error directly. As they are the ones sending the erroneous information to the credit reporting agencies, and can make the change/correction at the source. You can also contact the credit reporting agencies, Equifax, Experian, and Call Credit, and using their procedures, and providing the required documentation, have the error corrected. The reporting agencies have 30 days to deal with your dispute and make the correction. Omissions: Occasionally you may find that one of your accounts is not being reported on your credit history, or may only be reported on one of the credit bureaus. This can be due to the fact that the creditor in question that you have the account with, may not report accounts to the credit bureaus, or may report it to only one of the credit bureaus. You can inquire directly with the creditor, but it is their choice as to which credit bureaus they may report to. You may view an account on your credit report that you are unaware of, or you do not know the name of the lender reporting the account. Be aware that you may take out a loan with a company such as rent-to-own store, and the actual financing may be under a different name or bank.

6 Terminology Some of the terms we have used so far in our guide may not be known by everyone, so here we will try to list and define those terms: Credit Bureaus: Also named, Credit Reporting Agencies and Credit Reference Agencies. These are the agencies that gather information and details about yourself and anyone financially linked to you, to compile a report to show what accounts you have and how those accounts have been paid. Underwriting: The process when a bank or lender reviews your details, credit history, and other information to make a determination as to granting or denying a loan. Notice of Correction: A Notice of Correction is a statement from you, with a maximum word count of 200 words, that you can use to explain something that may be on your credit history. You may wish to explain a rough financial period you went through, or to dispute an account. Notice of Disassociation: This notice can be used when you no longer have any financial association with someone or a third party. If someone at your address has gone bankrupt, or has poor credit and it is affecting you getting credit, you can use this notice. Footprint or Inquiry: Any time someone looks at your credit history a footprint or inquiry is placed there. This inquiry shows who looked at your credit, and the date. These inquiries stay on your credit history for a period of two years, and can affect your credit score. (More on this when we discuss credit scoring). There are two types of footprints: Hard: These inquiries are when a lender looks at your credit report. These types of inquiries can affect your credit score and stay on your credit history for two years. Soft: Soft inquiries are when you may review your own credit report, or an employer may look at your credit, or some credit card companies may use these to create pre-approved lists. These inquiries do not affect your credit score. Credit Score: A numeric value given to you based on your credit history and various other factors. It is a number that aids lenders in predicting your ability to repay a loan. Authorised User: An authorised user is someone who is allowed or authorised to use an account, usually a credit card. They are allowed to use the account, but are not responsible for payments, and it is not reported on their credit report. Charged Off: This is when an account is deemed uncollectable by a lender and they charge the account off, or remove it from their books. It does not mean the account is no longer owed. CCJ/County Court Judgment: CCJs are issued by the courts when a creditor or someone you owe money to, takes you to court to collect the debt. Once a CCJ has been issued, a creditor can seek out an Enforcement Order allowing the use of Bailiffs, Charging Orders, and wage attachments, to collect a debt.

7 How Can Credit Reporting Agencies Get All This Information On Me Without My Consent? Now that you have a better understanding of credit bureaus and credit reports, you may ask yourself, how can someone, or a company, gather all this information about me, and all my details, and I have not given consent or permission for this? According to the Data Protection Act of 1998, credit bureaus/credit reporting agencies don't need your consent as long as they have a "legitimate reason" for gathering the information and you have been informed they are going to do this. As we discussed prior, when you complete an application for a loan or credit card, you are giving permission for that creditor to look at your credit report. If you refused to have any credit reporting agencies to have your details and information, there would be no credit report on you, and in return you probably would not be approved for any type of loan. Do Credit Bureaus Sell My Personal Details? The short and quick answer here is yes, credit reporting agencies to some degree compile lists, and can sell information. In most instances the details used are sold to other lenders who may target a group for preapproved notices. A credit bureau may sell the details of a group of people who all have good credit scores, and the lender buying this list then knows they are good to target for some promotional campaign. This is different than someone being able to actually view your credit report, again, they would need your permission to do so. Next up, everything you could want to know about credit scores and credit scoring.

8 CREDIT SCORES AND CREDIT SCORING Armed now with a clearer understanding of what makes up our credit reports and how credit reporting agencies work, we need to delve deep into the other elusive aspect of credit, and that is credit scores. "A credit score is a numeric expression based on a level analysis of a person's credit files, to represent the creditworthiness of the person. A credit score is primarily based on a credit report." Seems simple enough, but the procedure and process of which makes up how your credit score is calculated, is not that simple. It also is shrouded in mystery, as different lenders use different criteria or guidelines in determining what level of credit score is good enough for certain loans. A person's credit score can be as low as 200 or even less, to as high as over 900. The lower your credit score, the more of a risk you will be viewed as to a lender. The higher your credit score, the less of a risk, and more likely to have your loan approved. And as mentioned, a bank or lender may use different scores to determine to approve a loan based on not just the score, but the lender's model. One lender may have a policy that in order to obtain a mortgage the borrower must have a credit score of 600 or higher. Another lender's policy may stipulate that for a borrow to obtain a mortgage with them, their credit score needs to be 700 or higher. In addition, banks and lenders may use different scoring guides based on the loan product you are applying for. You may need a credit score of 650 in order to qualify for a mortgage, but need a credit score of 750 to qualify for a credit card. A mortgage loan is less risky to the lender than credit cards. You may place a large deposit when applying for a mortgage, and there is the property securing the loan. Credit cards are open lines of credit that are unsecured, and as such a higher risk to the lender.

9 How Your Credit Score Is Calculated The process of how your credit score is calculated, when broken down to its various components, will make it easier to understand. The actual process used, is a bit complicated, and again, not completely transparent. Your credit score is also fluid, meaning it can change over time. Certain factors that make up your credit score can change, and these can raise or lower your credit score. The analogy I have used over the years and puts it into simple terms and is easy to follow, is to think of what makes up your credit score like a pie that is sliced into different sized slices. These slices are various factors used in calculating your credit score. These factors and the percentage of weight they have towards your credit score are as follows: Payment History Your payment history accounts for 35% of what makes up your credit score. That is the largest percentage of all the various factors used. It is easy to see why a few missed payments or an account in arrears can damage/lower your credit score quickly. Amounts Owed Next up is the amount of debt you have, the amount(s) you owe on your accounts. This makes up 30%, or the next highest percentage used in calculating your credit score. Why this percentage is so high is due to the fact the more debt or high balances they have on their accounts, the more likely they are to be overextended. This is why it is not good to max out any lines of credit. The closer you get to your credit limit, the lower your credit score may go. Length of Credit History This is the amount of time you have been been credit active, or reported to a credit bureau. This makes up 15% of your credit score. The longer you been listed by a credit reporting agency, the better it is for your credit score. Types of Credit The types of credit you have makes up 10% of your credit score. Types of credit is the types of accounts you have. More weight is given to loans such as a mortgage, or credit card, then to a doorstep type of loan, or some other form of bad credit loan. New Credit New credit accounts for 10% of what makes up your credit score. New credit is when you apply for credit. If you remember from our discussion on credit reports, every time a creditor or someone views your credit history a footprint or inquiry is shown. Too many of these can lower your credit score, as lenders may feel you are out applying for a lot of credit and may get yourself into a financial pickle. There are some changes being made with these inquiries in that if you are applying for a car loan or a mortgage, and you apply at three (3) different lenders, as you are shopping around, these three inquires can be treated and counted as just one (1) inquiry as it can be seen you are shopping around. Now that we are aware of how our credit score is put together and calculated, in general terms, let's look at what does affect your credit score, in positive and negative ways.

10 Things That Affect Your Credit Score While there may only be five (5) major factors taking into account when calculating your credit score, there are many other smaller factors or nuances that can be used to help or hinder, the raising or lowering of your credit score. Let's start with the five (5) basics, and then move on from there. How you pay your accounts A no-brainer as 35% of your credit score consists of payment history. This can affect your credit score in a positive way, by making payments on-time, or in a negative way, by payments being paid late, or not at all. Balances on the accounts The more you owe, the more affect it will have in lowering your credit score. If you have five accounts with credit limits of 2,000 and each one has 1,900, this is going to adversely affect your credit score. How long have you been in the credit bureaus The longer you have been in the credit reporting systems, the better your credit score will be, and this ties in with paying accounts on-time. No matter how long you have been credit active, if you pay late, your credit score will be low. What kinds of credit do you have As we discussed, having lower rated accounts, like payday loans and/or doorstep loans, will lower your credit score. How often do you apply for credit If you apply around for a lot of credit/loans, these inquires are going to have a negative affect on your credit score. Additional Factors That Can Affect Your Credit Score Are you on the electoral roll Being on the electoral roll actually helps your credit. The credit reference agencies use this to confirm your address, which aids in proving where you may live, and strengthens your credit. Incorrect information We need to review our credit reports on a regular basis to insure there is no incorrect or erroneous information on them. These errors could be lowering your credit score. Court records Things like CCJ's will affect your credit score in a negative way, because remember, how we pay our accounts is 35% of our credit score. Insolvency records Going bankrupt, doing a Debt Relief Order, or entering into an IVA/Individual Voluntary Arrangement are all forms of insolvency, and will negatively impact your credit score. Keep in mind, everything, including any insolvencies, drops off your credit history after six (6) years.

11 Things That Do Not Affect Your Credit Score Wages What your earnings are is not reported on your credit history and in no way affects your credit score, unless you are not earning enough to pay your accounts, and then fall into arrears. Unreported loans If a creditor does not report a loan to the credit bureaus, it is not a part of your credit history and does not affect your credit score. This also includes any loans you may have with friends or family. These are not reported to the credit bureaus so they cannot be included in your credit history or credit score. Pre-paid credit cards Most pre-paid credit cards do not report to the credit bureaus, so these would be treated the same as an unreported loan and have no impact on your credit score good or bad. Soft inquiries As we have discussed, soft inquiries, such as when you review your own credit history, an employer may, or when lenders do these for marketing or pre-approved campaigns, do not affect your credit score. Only hard inquiries affect your credit score. Spouse or partner's credit Unless you have joint accounts together, your credit history is separate from your spouse or partner's credit history. We all have our own credit reports and credit scores. It is only if you have joint accounts, could one person have an affect on someone else's credit score, and that could be for failure to make payment. If someone at your address does have poor credit and you think it is affecting you, you can have a Notice of Disassociation placed on your credit report. Your rental history In most instances your rental history and your paying your rent, on time or not, will not affect your credit score due to the fact the majority of landlords do not report to the credit bureaus. So your rental payments are treated like an unreported loan. However, if your landlord reports your payment history to one of the rental bureaus, then this is incorporated into your credit report, and can affect your credit score. Savings Any savings or investments you may have, including pensions, are not reported to the credit bureaus, so these would not impact your credit score.

12 How Are Credit Scores Used Now with a full understanding of our credit reports, and knowledge of what makes up our credit score and what does and does not affect our credit score, what are credit scores used for? In simple terms, to make a decision or determination about something. If we remember the definition of a credit score: A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of the person. A credit score is primarily based on a credit report. We can see that these scores are used to make a decision as to if a lender will grant a loan to someone applying. The higher the credit score, the more likely they are to be approved and receive the loan. However, credit scores are used in other ways as well: Loans Insurance Employment Jobs And no I am not referring to the late Steve Jobs, but there are employers that use credit history and credit scores as a part of the hiring process. Does this mean that someone with a higher credit score will be a better employee, no it does not. There was even a study done that showed no correlation between paying your bills and how well you worked. Naturally there are some jobs that an employer may feel a credit check is in order prior to hiring someone. If an employee is going to be handling money, or if a security clearance is required, as a part of a background check, a potential employee's credit report may be checked. The employer doing this must get your permission to do so, and their inquiry does not impact your credit score.

13 Insurance When applying for an insurance policy, be it a life insurance policy or for car insurance, the insurer may review your credit history and credit score as a part of the process of underwriting the policy. In doing this for life insurance, it may be the person looking to be insured is asking for a huge policy which may be outside what they may be worth. A person earning 20,000 a year and asking for a 10 million insurance policy is slightly outside their financial boundaries. In applying for car insurance, some insurers basically finance you the annual premium so you can make monthly payments. Not many of us can pay the insurance premium for the entire year up front. The Head of Consumer Affairs at Experian, James Jones said, Insurers will usually offer a pay up front or pay over credit terms option. If you do pay over credit terms, some insurers can use your credit history to determine how much extra to charge you for the convenience of spreading the cost. If you pay up front then your credit history cannot be used as you are not taking a credit option. You should always be told before your credit report is accessed to calculate your credit rating and it is certainly sensible to review your credit report yourself from time to time to help make sure it paints an accurate picture of your financial situation. The Head of Car Insurance at Confused.com, Gema Stanbury states, Car insurers may not view reaching the age of 70 as a poor risk factor but be more concerned with the driving experience gained and NCB (no claims bonus) earned. Additionally, an insurer will use a credit score to assess whether a consumer will qualify to pay by direct debit, and by doing this check it will determine the initial deposit that the consumer would need to pay towards their car insurance. So credit scores and your credit history are used for more than just getting a loan, another reason to maintain a good credit score.

14 How Credit Scoring is Changing Just as with all businesses, you have to keep up with the times, or go by way of the Dodo. Credit reporting and credit scoring are no different, the models and components that have been used in the past, need to keep up with the times and change as well. In America unpaid medical bills, remember there is no NHS there, are sent to collection agencies to be collected, and can be reported as a bad debt on someone's credit history. This was recently changed to allow the patient time to get their insurance company to pay the medical claim. If the insurer is delayed in making payment, the unpaid bill would be reported to the credit bureaus, and it could impact someone's credit score. Fortunately, we do not have to deal with this here. Lenders and banks want to lend money, they need to in order to make more money. However, there are a lot of people out there that have no credit, and have not been credit active; or they may have had poor credit in the past. Since these two groups of people would have a low credit score, they may be denied a loan through traditional lenders, and may turn to payday loans or guarantor loans. Also, just because someone may have had poor credit in the past, or they have no credit, doesn't mean they do not pay their bills on time. Bills like rent, gas, electricity, mobile phone, Internet, etc. By using alternative factors, such as how someone pays their basic monthly bills, a new way to score someone for credit can be created.

15 Facebook and Getting a Loan Social media is everywhere, and used by billions of people. We are all addicted to it and cannot imagine going anywhere without our mobile phones, and knowing where the WiFi hotspots are located. Facebook recently received a patent which in essence allows banks and lenders the ability to grant or deny loans based on your friends on Facebook. If your friends have poor credit or low credit scores, you may be denied that loan you so badly wanted. The patent also is supposed to aid in filtering out unwanted spam, and make search functions easier, however, it is the ability of lenders to see your friends credit rating and credit score that is the real thing we may wish to take issue with. Our credit being judged by our friend's credit. The patent states, When an individual applies for a loan, the lender examines the credit ratings of members of the individual s social network who are connected to the individual through authorized nodes. If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application. Otherwise, the loan application is rejected. In Washington, D.C. at the Electronic Privacy Information Center (EPIC), the Director of the Consumer Privacy Project, Julia Horwitz stated, It s possible that this is not legal, Horwitz told the Star. It seems that the current thinking among creditors and debt collectors is that if somebody borrows money or wishes to borrow money or needs to repay money that has been borrowed, that person s entire life gets to be exposed. A controversial and unique way to add to credit scoring and in making a decision to grant a loan.

16 How To Improve Your Credit Score A few ways to improve your credit score: Pay your bills and accounts on time I know I have said/written this a few times in this guide, but as payment history makes up 35% of your credit score, this is imperative to do and maintain. If you have missed payments in the past, keep on course and begin paying again in a timely manner. In time your credit score will rebound. Keep balances on accounts low You want to try and not have your accounts close to the maximum credit limits you may have. Remember, 30% of your credit score is made up of amount(s) owed. Don't take out high-risk or bad debt loans These types of loans, such as catalogues, and payday loans, are high risk and can lower your credit score. If you have checked your credit history and credit score, and feel it is not as strong or high as you would like it to be, or if you have been denied credit, there are ways to improve your credit score. If you have had some financial disasters in the past, which has impacted your credit in a negative manner, keep in mind, time heals all wounds, and this goes the same for credit. Everything drops off your credit history after six (6) years, but this does not mean you have to wait six years to receive credit, or improve your credit score. Avoid applying for credit The more inquiries or footprints you have on your credit report can lower your credit score. Limit applying for credit. Get on the electoral roll By being on the electoral roll it aids lenders in knowing you are who you say you are and at what address you reside. Correct any errors or omissions If there are any mistakes or errors on your credit history have them corrected. You can either contact the creditor reporting the mistake directly, or go through the credit reporting agencies procedure. Close any accounts you no longer use By doing this you limit your access to other credit lines, which can help in making you look less in need of that access. Do NOT close out your oldest account, even if no longer used. It shows how long you have been credit active and aids in increasing your credit score.

17 CREDIT MYTHS AND SOME COMMONLY ASKED QUESTIONS Over almost 30 years now of assisting people with debt and credit issues, I have heard, what I'd like to think is it all. But one can never hear it all, however, I have heard a lot, and been asked many questions. So while I cannot possibly cover all of the questions and myths I have heard over the years, I thought with this guide it would be good to address as many as I can. There is a blacklist for people with bad credit. Myth! There is no such thing as a blacklist or people being blacklisted due to having weak or poor credit. A person may be denied credit due to having a low credit score, poor credit, or not meeting the lending criteria of the lender, but there is no list of people with bad credit. If my partner or spouse has bad credit or goes bankrupt, it will affect my credit. Another myth, but with a couple of caveats. I have heard many times over the years why someone will not marry or move in with their partner due to their debts and/or bad credit. They said as soon as they get married, they take on these debts. Totally false! Many felt as soon as they moved in to live together it would affect their credit as well. Again, false. The caveats are this: a) If you have joint accounts together, there can be an issue if one person or both people don't make the payments, as the account can be reported on both credit reports. b) If you reside together at the same address, there can be issues where the address used for someone to apply for credit comes up. This can be remedied by having the lender in question look further at the application, and the person applying, and if need be a Notice of Disassociation can be placed on the credit report of the partner/spouse who has good credit.

18 If I go bankrupt my employer is notified. Not true. In the course of going bankrupt your employer is not notified. The only time your employer may even have an idea you that you have gone bankrupt is if an NT tax code is issued by the Official Receiver. This code means no tax is to be taken out of your wages. The tax that would be paid is to be paid into the bankruptcy. I have not heard of this being done much lately. If I go bankrupt my landlord is notified. Somewhat not true, and I'll explain. The OR in your bankruptcy does not contact your landlord expect under a couple of circumstances: a) You are in arrears with your rent, in which your landlord is one of your creditors as you owe them money. b) If the OR requests a copy of your tenancy agreement, and you cannot provide one, the Receiver may, and I say/write MAY, contact your landlord to confirm you do not have an interest in the property. The only issue a bankrupt may have with their tenancy is some tenancy agreements have a clause that allows the landlord to request you leave should you go bankrupt. There are those that feel the bankruptcy brings a blight on the address. You would need to review your tenancy agreement, if you have one, and make a decision from there. Bankruptcy stays on your credit history forever. False. Bankruptcy stays on your credit history just the same as anything else, six (6) years. This myth may stem from the fact if you are asked the broad question, have you ever been bankrupt?, do you disclose the fact or not. Many mortgage applications do not ask if you ARE bankrupt, but if you have EVER been bankrupt. I have not heard from my creditors in (insert years) so I no longer owe the debt. If you inserted six (6) or more years, you may be correct in that if a creditor has no contact with you for over six years, an account can be statutory barred. This means it is no longer owed. Based on the Limitation Act 1980, a creditor has six years to try and collect a debt. However, there are some grey areas to this, such as if the creditor has attempted to contact you, but you have not provided them any new details if you have moved. In addition, if a CCJ was filed, this can negate the limitation act. Also, secured loans have a 12 year limitation period.

19 My ex-wife/husband is to pay an account we have as stated in our divorce decree. This is a question I have heard many times, my ex was to pay an account we had together, they have stopped paying, and now the creditor is contacting me for payment. Unfortunately if the account is a joint account, in both names, or you guaranteed the loan, both parties are equally responsible for the payments. The divorce decree does not remove or take away both parties responsibility for the account. So if the divorce decree states one person is to pay the debt, and they fail to do so, the creditor can seek payment from the other person. Keeping a balance on a credit card helps your credit score. Myth If we refer back to our credit score pie chart we can see that account balances make up 30% of your credit score. Carrying a balance in no way improves your credit score. It is just a myth. Refuse any credit line increases on your credit cards. If your credit card company offers you an increase in your credit limit, take it. This doesn't mean use it, but take the increase. Of course the card company is hoping you will use the increased line of credit, and make more money off you. However, by taking the increase you may actually improve your credit score. The increase of credit changes your utilisation ratio. Here is an example: You have a credit card with a 3,000 credit limit and a 900 balance. This gives you a ratio of 30% If the bank increases your credit limit to 4,000, and you keep the same balance, your ratio is now 23% or lower. Amounts owed accounts for 30% of your credit score, by keeping a lower ratio, your credit score can increase. These are just a few, of the many credit myths and frequently asked questions I have heard over the years.

20 CONCLUSIONS & QUIZ Sadly, we have reached the end of our guide on credit reports and credit scoring. If you have read the entire guide, you should have a strong working knowledge of how credit reports and credit scoring are created and maintained. Credit Score Quiz 1) Bankruptcy stays on your credit history for: a) 6 years b) Forever c) 12 years 2) Credit scores stay the same forever: a) True b) False 3) My spouse or partner's debts affect my credit: a) True b) False 4) There are three (3) credit bureaus in the UK: a) True b) False 5) My landlord will be notified if I go bankrupt: a) True b) False c) Possibly if I cannot provide a tenancy agreements

21 6) Credit histories and credit scores are only used to grant loans: a) Yes, they are only for getting creditor b) No, credit scores can be used in getting a job, and an insurance policy 7) Name three (3) items found on your credit report: a) Your name, address, and bank balances b) Creditors you have accounts with, payment history, and current balances c) Any CCJ's you may have, your partner or spouse, and your address 8) Being on the electoral role helps your credit: a) True b) False 9) What is a Notice of Disassociation: a) A notice placed on my credit history showing a default b) A notice placed on my credit history disassociating me from someone c) A notice placed on my credit history showing pending court cases against me 10) Applying for too much credit does not affect my credit score: a) True b) False

22 Ok, let's see how well you did with this little quiz. 1) The answer is: a) 6 years Bankruptcy just like everything on you credit history stays there for 6 years. 2) The answer is: b) False Credit scores can change over time and do change over time. That is why there are things you can do to raise and lower your credit score. 3) The answer is: b) False The only way your spouse or partner's debts can impact your credit is if they are jointly held accounts, or if you have co-signed ro guaranteed a loan. 4) The answer is: a) True The 3 credit bureaus are Experian, Equifax, and Call Credit. 5) The answer is: c) Possibly. If the Official Receiver in a bankruptcy requires proof you do not have an interest in the property, they can request a copy of your tenancy agreement, and in some instances they 6) The answer is: b) No Credit scores are used by lenders to make a decision in granting a loan, but they can also be used by employers when vetting a candidate for a job, and also by insurance companies 7) The answer is: b) While most of the other items do appear on your credit report, bank balances (a) and your partner or spouse (c) do not appear.

23 8) The answer is: a) True Being on the electoral roll aids lenders in knowing you are at the address you state you live. 9) The answer is: b) A notice placed on your credit report disassociating you from someone. 10) The answer is: b) False A slightly tricky worded question. Applying for credit leaves an inquiry or footprint on your credit report. Too many of these can lower your credit score. So how well did you do? Did you get 100%? The quiz is more for fun and to help you see how much you have learned form our guide Advancis Ltd trading as Buddy Loans is authorised and regulated by the Financial Conduct Authority with Interim Permission no Registered company number Registered with the Information Commissioner's Office Z Registered Address: Alexandra Court, Carrs Road, Cheadle, Cheshire, SK8 2JY T: