Reply With QuoteThink the electoral register is taken into account, maybe as you've sold the house its dropped.Originally Posted by adam164
Hello chaps.
I always thought taxes, along with car insurance I'd never fathom out, but I think I can add credit scoring to that list.
Up to a few weeks ago, I had a perfect Experian credit score of 999. This was with 8 credit cards, a bank loan & a mortgage. A month ago, I sold my house, hence no mortgage, closed & paid off 4 cards & my bank loan & reduced the 4 other cards so there was a a nominal amount on each. I checked my score on Friday & it's gone down to 700!! Which worries me as I'm getting a joint mortgage with the missus.
Please if there's any experts on here explain why the score has gone down so drastically? I'm just a bit worried.
Cheers
Adam
Think the electoral register is taken into account, maybe as you've sold the house its dropped.
Closing accounts may reduce your credit score apparently. The advice is to leave all accounts, including credits cards, open. Reason being it shows a positive credit history over the years.
Closing accounts definitely has a (temporary) detrimental effect on your credit score.
I paid off a small sum on my only outstanding CC debt and my score dropped! Reading up in it, they say it can take 4-4 months for it to “recover’.
Seems counter-intuitive to me but there you are.
Bizzarely, something you can do to raise your credit score is to get some credit.
From my Karma account:
Factors affecting your score
Credit limit
More to do
None
There aren't any credit limits on your report.
WHAT THIS MEANS
Your total credit limit is comprised of the credit limits from each of your credit accounts.
WHY THIS IS IMPORTANT
A higher credit limit often indicates more trust from lenders. It can also be an indicator of your ability to manage unexpected expenses, and therefore can mean a better credit score.
WHAT YOU CAN DO
Request a higher credit limit on existing accounts or apply for new credit accounts. An overall credit limit of more than £15,000 would optimise this factor, but you should only take out as much credit as you can afford. More than £4,000 is considered OK too. Each extension of your credit limit helps your overall score as long as you can manage the debt.
R
Ignorance breeds Fear. Fear breeds Hatred. Hatred breeds Ignorance. Break the chain.
Just look forward to the day when you'll never need to borrow money again.........they can stick their credit scores where the sun don't shine and telling a potential lender to do that that is somewhat gratifying.
The whole credit score system stinks, grossly unfair, but if the computer says 'no' that's the end of it!
I think that a lot of it is based on stability.
One interpretation of closing accounts and clearing long/short-term debt is that you are no longer cash rich.
I don’t think the amount of cash you have is ever a factor, since they never ask anything about savings, or can they check but as has been demonstrated, the less credit you have, the less they think you can afford it.
I personally wouldn’t worry too much, the points above explain some of the reasons for the change but from what I understand, your credit score is only one of the factors a lender looks at. A lender will also look at affordability, earnings, age, utilisation of current debt along with multiple other factors.
Psychologically the drop in your credit score will have a mental effect on you, by my opinion a good mortgage broker will open many more doors than a low credit score could close. Plus, you have positive reasons for the change in score.
My credit score changes based on the % of utilisation I have on specific credit cards, i.e the closer to my limit, the lower my score. However, if I spread my expenditure over my credit cards and none go above 50% utilisation, despite the debt going up, the credit score also goes up.
Somewhere in the ‘700s’ is about right for someone with mortgage paid off and no outstanding (long term) credit card debt…….
I don’t think it will hamper you.
You can actually link your bank account to Clear Score to get better rates because they get a snapshot of your cash pot & cashflow.
In M&A cash is a huge factor in credit calculations, also KYC (but KYC isn't technically a credit check).
U.K. average score is 585 you are doing well. The score is influenced by a number of issues, but paying utility bills and the trend on long term debt such as your mortgage are key.
A high credit limit means the lender considers you to be a good risk on an ongoing basis. If you close the product the real-time picture is lost and the score will lower.
Some credit cards like an AMEX card will show like against your name, so servicing that card is a priority as you are replaying the facility.
Last edited by joe narvey; 12th September 2022 at 16:59.
My Lloyds online account is linked to TransUnion, which gets updated at the start of each month. It was this that explained why my score had gone down after paying the card off. It said I had reduced my short term debt (to zero).
Credit scoring seems a bit of a balancing act between using credit but not having too much and not having credit available that you don't use, keeping credit accounts open for a long time etc.
Having kept an eye on all 3 sources (Credit Karma, Experian, ClearScore), I find Experian to be the most forgiving. Whereas I've seen my score in the other go up and down a few points, Experian has remained at 999 and hasn't moved. I suspect you'll find it rises again once the changes you've made have settled down.
Worthwhile using Experien Boost if you've not done so far. It's free iirc and can only positively impact your rating (if it's negative then they disregard it). Since it's often the credit checker that banks use it may just budge you enough in the right direction for mortgage etc.
You can use it through their website or app.
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I couldn't give a flying fcuk about my so-called credit rating. I've never checked it out & probably never will.
That's fine as long as you never need a mortgage or a loan
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Indeed…. Keeping your credit score in the right place is critical for 99% of the world who require credit to buy houses, cars etc
The difference in APR can be staggering
OP, my experian credit score has also dropped for some reason and I'm not sure why,(always been on 999) on other credit platforms I am all good and it hasn't dropped at all.
Credit scoring is a blunt instrument, I seriously question its value.
Lenders don’t want to lend to those who are sinking in a sea of debt, that’s understandable, but they don’t want to lend to those who can afford to pay back quickly, by the same analogy these folks are swimming strongly on the surface. Lenders seek those who are snorkelling, up to the hilt in debt but just able to continue with repayments.
The behaviour of lenders boils my piss, instead of making judgement based on tangible facts pertaining to the individual and forming a balanced view they use crap like credit scoring. A family member fell foul if the system last year, she incurred a parking fine and stupidly didn’t pay it, having explained the circumstances she believed the explanation had been accepted and the fine waived. She was in the wrong and ended up with a CCJ against her name for a paltry £50 fine. Correct procedures hadn’t been followed, she hadn’t received notification of court action, but trying to fight it was going to cost more with no guarantee of success so the CCJ stands against her. She acted unwisely, being heavily pregnant didn’t help! Now she’s struggling to arrange a new mortgage at good rates simply because of the CCJ and her credit score, which bear no reflection to her financial position or ability to pay. Computer says ‘no’.......end of.
Devils advocate, do you think in the above case the system worked ?
“… stupidly didn’t pay it..”, “ she believed the explanation had been accepted..”, ..” she acted unwisely.”
The credit reference system is also used to protect people from getting into debt they can’t service. Why would a lender give a mortgage to someone that didn’t pay, didn’t follow-up on a key financial risk?
Btw: if she has evidence of due process not being followed, being mislead the matter was resolved, etc then she can appeal the CCJ at very little cost for it to be removed or a notice of correction can be provided that is provided to the lender at the time of a credit application.
Lots of good advice below and something I had to get on top of before getting my mortgage - at that time i had no debt or credit which as aluded to below isnt actually a good thing - likewise length of time with lenders is another plus as pointed out below
But this website from martin lewis is great as gives you a updated experian score monthly and pointers how to improve it as well as soft searches for lenders before you complete a hard search (which effects your score)
https://www.moneysavingexpert.com/creditclub/
Would also recommend the credit karma app…. I keep an eye on my score periodically and it’s good at resisting alerts or issues
It can also (assuming you want to build your rating) point out where you need to improve
Daft as it sounds, less you owe equals lower credit score!
I get marked down for paying my mortgage off and having no mortgage so how does that work.
Keep plenty of 0% CC on go or but stuff on 0% and just keep paying minimum.
Crazy ain't it!
Mine has always been 999 since I checked it except for a month or so when we purchased a second property, when it dropped to around 975 as I recall.
999 right now.
We put lots on our credit cards each month and pay it off in full each month.
Baffles me really.
M
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Breitling Cosmonaute 809 - What's not to like?
Massive thanks for such useful information. That is exactly what I was looking for.
Last edited by Owren; 14th November 2022 at 23:55.
The only reason I check my rating is that it can signal if you are subject to identity theft, if someone is using your identity this is likely the first way you’d spot it.
The thing that annoys me about credit score is that it typically rewards mediocre financial decisions better than good financial decisions.
i.e. Two identical people. Person A lives lavishly, builds up credit across multiple credit cards (let's say 8 in a cheeky tribute to the OP), manages to keep above water and make the required payments. Person B is financially prudent and only utilises secured lending (i.e. mortgage) and builds up a healthy savings balance. Which one ends up with the better credit score? Person A. The argument supposedly being Person A has built a history showing they pay their debts, whereas Person B being financially prudent and having a history of building up savings counts for little. Doesn't seem fair, but I can see how it might be profitable.
Agree with you Joe. A CCJ shows a debt wasn't paid, as confirmed by the courts. If that isn't relevant to the risk of a future loan, I'm not sure what is. If the CCJ was due to procedural error then there is a process to challenge it, but it's unreasonable to just expect a bank to just disregard it.
As long as their credit history is fine they will be fine - the score you see as a consumer does not automatically relate to the scoring done by lenders.
Experian once won a case with the ombudsman that someone's credit score was wrong on the basis that only the consumer saw that score so it did not matter.
The scoring also varies to try and get you to take the credit scoring company's offers. I check the *history* is correct but ignore the scoring.
Think of it as a Debt Score to be used to judge someone’s suitability for more debt. It’s not a financial hygiene score.
Person A uses various sources of debt and builds up a good history (and therefore score) of doing so. The chances are they’ll be applying for more debt in the future so the score is relevant and important so they get the best deals.
Person B doesn’t and is less likely to request more debt in the future, so there is less opportunity to understand how good they are at managing debt, but that also means their score is less relevant.
The real answer is for Person B to play the game. Open some credit cards, request higher limits, use it but pay it off even if they don’t need to, and keep accounts open for as long as possible. That’ll build their debt score just in case they need it, but without detriment to being financially sensible.
I sort of think you're missing my point (possibly it wasn't well made). It's not a question of why it happens, I understand why A gets a better score than B, I said the exact same reasons in my own post.
But I maintain that the credit score "typically rewards mediocre financial decisions better than good financial decisions" and is by extension a frustrating measure. A credit score claims to "rate a consumer's creditworthiness" but in reality it's better described as a rating of a consumers likely profitability to the lending institution.
You sort of make the point for me in the final part of your post. Person B with their prudent approach to finances, mortgage but no unsecured debt and built up savings needs to 'play the game', 'open some credit cards, request higher limits' and utilise lines of credit to somehow be more creditworthy. We live in a society where you're scored more highly for building up debt then you are for building up savings, not surprising really why we're in the state we're in..!
I agree entirely, I think we’re both badly saying the same sort of thing. It’s a measure of your ability to manage debt, and your likelihood of managing it well in the future, so somebody who doesn’t rely on debt has a lower score as a consequence of using less debt.
Something I’ve seen in a limited fashion that’s closer to addressing your point is an ‘affordability score’, which I first noticed on ClearScore. That allows you to link your bank accounts and it scores you on how much you save, what balance you normally keep in your bank accounts, that sort of thing.
It still doesn’t overcome the lack of a credit / debt score entirely, but it’s a measure of good financial hygiene.
A 'credit score' is just a made up metric used by banks and others which they can do with as they please. If someone has a track record of repaying their borrowings, all well and good. If someone else hasn't they're more of an unknown (even if they have no 'negatives').
Not really difficult to understand, it's their money we're playing with.
Not entirely sure if this comment was directed towards me, thought I'd check before replying
I took out an £80 loan to buy a TV in 1971. The reason for taking out the loan was that they took £5 off the price and did not charge any interest.
Since then I have never taken out a loan or have paid a penny in interest other than on a mortgage. I have a credit card but I clear the debt each month.
I have been told that because of this my credit rating is at rock bottom. So I be a financial pleb.
That combination can't equate to rock bottom, so I imagine you've been led to believe it's worse than it is. However you won't have a super high score either, you've lived far to prudently for that. Should have bought some expensive cars you couldn't quite afford and more watches on credit, then you'd be more 'creditworthy' apparently.
I suspect there's a misunderstanding as to the impact of this, actually. I'm very similar in that it's decades since I've owed anything save for my now-cleared mortgage and yet I have scores of 999/999 on Experian and 951/1000 on Clearscore. For clarity, I do use credit cards for convenience now and then, but always clear the balance at month end.
That's what I believe...don't get this relatively recent development of companies offering you the opportunity to keep tabs on your credit rating, seems a bit unnecessary and the amount of angst/ questions it seems to generate, largely a waste of time imho...time better spent on with earning, making money...then the buggers will practically knock down your door with offers of credit deals...I'm always getting offers from my bank's and others, yet don't regularly give my credit card a work out or carry large debt aside from that secured on properties. I suspect people who do need to obsess and keep tabs on their credit rating, barring victims of scams, are probably living towards the edge of their means, month to month, which is unfortunate but can be rectified with discipline and hard work, step away from buying stuff on credit.
Last edited by Passenger; 31st October 2022 at 08:26.
Your approach requires self discipline and unfortunately that is in short supply in this day and age. In my last job back in 2010 a young woman that I worked with had a credit card debt of £9000.00 and she saw nothing unusual in that.
Happen you're right Mick, yup when I was still in work until 2010, there'd be slightly younger guys than me juggling their debt loads...it's nuts, not a great strategy to achieving financial security/ early retirement.
The really bad thing was that young woman was monitoring company finance.
I/we would be interested in finding out our/we credit score but it seems like allowing some (more) strangers carte blanche to poke around in our personal affairs.
They already have this information and generate this score automatically - it's what the credit agencies do. If you don't check it, you have no way to see if the information they hold is correct (which is the important bit).
If you register for:
* Clearscore (Experian)
* Creditkarama (Transunion)
* Moneysaving Expert (Equifax)
You will have access to the data all the major agencies have on you.
Never checked mine but thought I would just for fun, I don’t think I will lose any sleep over it.
Cheers,
Ben
..... for I have become the Jedi of flippers
" an extravagance is anything you buy that is of no earthly use to your wife "
I checked my credit score for the first time in ages last night. Experian has me at excellent and CreditKarma only has me as fair ?*??
Really don’t understand how there can be so much difference between the two.
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Did you look at the detail both hold on record for you to compare?
No, as Experian only give you basic info unless you subscribe, but CreditKarma gives a lot more for free.
Given they were the ones that rated you low, did you spot any issues with the info or any missing accounts?
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