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Spend & Save

Money Insider: It's well worth checking your credit rating


Households with a poor credit rating can pay between £1,089 and £1,225 more per year than those with healthy credit scores, according to a new report.

Dr John Glen, senior lecturer at Cranfield Business School, provided a number of examples to highlight just how much some are paying over the odds by missing out on the best tariffs, often adding hundreds to the cost of utility bills and mobile phone contracts.

The report, commissioned by specialist credit card company Aqua, revealed that families with a lower credit score typically can only access a month-by-month broadband broadcast contract (avoiding the need for a credit check) which means they face an average annual charge of £174.84, while those with good scores pay only £59.88.

An even more alarming statistic is that an £8,000 car purchased on finance could cost someone with a poor credit rating £6,798 in interest payments versus an average of £1,198 for someone with an excellent credit rating.

If you've never looked at your record, I'd recommend that you pay £2 to obtain a statutory copy of your own report, either online or by post from Experian, Callcredit or Equifax.

This will enable you to check exactly what information is registered against your name as the details may be incomplete or incorrect and thus make it more difficult and more expensive to obtain credit.

Your credit report contains details of your balances, limits and payment history. It will also list any late or missed payments on your existing loans and credit cards as well as previous borrowing you've had during the last six years; it will also include details of any bankruptcies and county court judgments as well as the amount you currently owe on your credit agreements together with details of searches and new applications made.

Make sure you are registered on the electoral role, otherwise you won't appear as being listed at your address if a lender makes a credit search.

Third party information, including members of your family who live, or have lived, with you does not appear on your credit file as long as you don't share any joint financial commitments. If you've got any financial associations with ex-partners, such as joint accounts, make sure these are closed down.

Other people who have lived at your address previously will not affect your credit score. Information that you won't find on a credit record includes details of savings, student loans, Child Support Agency details or criminal records.

If you're looking for a few tips on how to improve your credit rating, take a note of the following: close credit card accounts that you're no longer using – even though your balance may be zero, any prospective lenders will take into account any existing credit limits you have available to you when assessing applications for new finance.

If you apply for credit and are declined don't make further applications with other lenders in the hope that one may say yes, as multiple applications and searches on your file within a short space of time will have a negative impact on your credit rating.

Having no record of managing credit can count against you so it's worth having a credit card and using it a few times each year – if you repay the statement balance in full and on time it won't cost you a penny, but demonstrates that you are capable of managing credit and will reflect positively on your file.

If you've never taken a look at your own credit file I'd recommend getting hold of a copy – it could turn out to be £2 well spent.

Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk