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Ask Lolly: we're busting the credit rating myths

(Update) Today is your last chance to put your credit rating questions to James Jones of Experian. Don't miss out!

 

by Victoria Bischoff on Aug 14, 2012 at 16:37

Ask Lolly: we're busting the credit rating myths

(Update) Today is the last day we're collecting questions on how your credit rating is calculated and what does and doesn't affect it, so make sure you get yours in quick.

Credit rating myths

A friend asked me recently how to find out whether a house has been put on a 'credit blacklist'.

A previous occupant had used the address to apply for credit cards, racked up a load of debt and then failed to repay it, he explained.

Well, the answer to this has two parts.

First, there is no such thing as a credit blacklist – it’s merely a well-publicised myth.

Second, debts taken out by people who previously lived at your address do not affect your credit rating. Credit checks take place on individuals not addresses, so as long as you do not have a financial connection with a person – say you share a bank account, for example – your score shouldn’t be affected.

This is not the first time I’ve been asked this question. Credit rating myths are repeated so regularly it can be difficult to work out what really does affect your credit rating and what is just rumour.

To help you understand more about how lenders decide whether or not to lend to you, James Jones of Experian has agreed to answer any questions you might have about your credit rating and the information credit reference agencies hold on you.  

How to ask a question

To ask a question simply leave a comment in the box below. We are collecting questions until the end of play today and aim to publish answers by Friday 17 August.

This is your chance to ask anything you’ve always been a little unsure about when it comes to what does and doesn’t damage your credit rating – so don’t miss out!

26 comments so far. Why not have your say?

Murray B

Aug 09, 2012 at 12:50

Many companies publish a 'typical APR' when they advertise for a loan, yet when you go through a full application (including credit check), it is only at that point that they will finally give you your actual specific loan APR.

As a consequence of this 'APR profiling', it might be prudent to at least apply to 2-3 companies to see who will offer you the most favourable APR. However, each time one does so, the companies reveal that a footprint of each application will be left on your credit history.

Given the circumstances, this would seem quite unfair. Is it true that mulit-allications, not multi-loans, could affect your credit score/profile?

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Murray B

Aug 09, 2012 at 12:51

should read 'multi-applications'

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Morpheus

Aug 09, 2012 at 14:08

is it true that people can sue credit reference agencies for liable if the agencies hold incorrect information on any individual and 'publish' that information to lenders? Moreover, is it true that affected parties can then sue both the credit reference agency and the source of the incorrect information for damages under the defamation laws of the UK. This includes any consequential loss such as not obtaining a mortgage to purchase a property.

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Rick Sure

Aug 09, 2012 at 14:47

One rule that never changes, the more desperate you are to borrow money the more the lender will screw you

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dd

Aug 09, 2012 at 16:42

Morpheus,

I don't know but ... I heard a lawyer on the radio say that there is a deadline for defamation. He mentioned a year. He also said that it can sometimes be difficult to prove consequential loss. If you have something to pursue, contact a lawyer who is expert in the subject.

I was taking interest because I know of a case where it took a certain company seven months to *correct* their records.

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Bill lawson

Aug 09, 2012 at 16:52

Is it possible to take out a loan that will be paid back by a relative ?

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hopalong cassidy

Aug 09, 2012 at 19:02

Bill . Yes. Just change your name to any person having the title HRH.

Be happy.

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Mrs B

Aug 09, 2012 at 21:10

If a flat rental lease is signed by 2 people sharing and one declares bankruptcy after 9 months, will the credit rating of the unrelated innocent party be affected?

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Paul Barrett

Aug 10, 2012 at 04:37

Every time you formally apply for ANY credit it goes down as a recorded footprint and YES this affects your footprint bigtime.

It will stop you gettin g a mortgage if you have too many at one time.

Be aware tha Aviva, everytime you obtian a quotation will carry out a recorded credit seach.

They do not even advise you of this.

They are fraudsters as they can severely damage a persons credit profile just by that person obtaining different insurance quotes from Aviva.

Avoid Aviva at all costs if you value your credit profile.

For some very strange reason Aviva ALWAYS presume that you will pay using their credit service.

Whereas most people will pay the premium in one fell swoop.

The idiots therefore, correctly carry out a recorded credit search for a credit product whether you intend to use the service or not.

so just imagine with Aviva you get qotes for

Life insurance

Motor insurance

House contents insurance

Buildings insurance Car insurance

Holiday insurance

ASU insurance

Income replacement insurance

That would be 7 recorded credit searches on the same day.

That would destroy any chance of a mortgage or credit card application being successful.

What you have to do is ask for quotations with all credit companies and then no recorded credit search is applied.

Just because the recorded credit searches say Aviva the computers will NOT recognise the difference/

There are other organisations which engage in these fraudulent actions, thereby damaging a t least for a year a person's credit status.

Be very careful and always confirm that unless you are specifically applying for credit always ask for a quotation only with confirmation that there will be no recorded credit search.

Any entry which indicates an id check or verification is ok as it is NOT a recorded credit search that may be seen by other lenders.

It will ONLY be seen by you and the organisation that carried the id check out.

Never throw credit agency info away.

They are absolutely useless.

I had Equifax try to re- associate me with someone who I had been disassociated form for about 5 years.

I advised I had correspndence from them advising me that I was indeed disassociated.other

They did NOT have any of that correspndence as it was so old.

I had to send them copies of their correspndence to me otherwise they were refusing to disassociate me from theis person who had gone bankrupt.

Absolute idiots.

Experian are just as useless.

I had one credit card account which had been recorded twice.

I tried with them and the lender to have one account detail.

They never did succeed in amending the file correctly even after a year of me trying.

In the end it didn't matter as the account was closed down and I ended up with 2 accounts being closed on my record even though ther was only 1 account.

Do not trust CRA's they and the lenders are useless.

So far the one that I am really pleased with is the FREE www.noddle.co.uk service which give FREE access to credit reports and scores unlike Experian and Equifax who hav ethe temerity to charge for information.

This even when it is in their interests to ensure credit details are all correct.

noddle is a division of Callcredit.

Every person should join noddle, it costs absolutley nothing at all to view and amend reports and info.

It saves wasting £2.00 every 6 months for a stautory report.

Callcredit are being very clever on the basis that providing the service for free will encourage people to ensure the info on them is correct which will then make it easier for Callcredit to sell their services to lenders on the basis that the info is more correct than the other 2 CRA's as people can check for FREE.

Very clever Callcredit.

Effectively using consumers to be their unpaid employees ensuring all data is correct.

I don't mind as I get everything fee

good luck to them if they make money out of me ensuring MY data is correct.

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Henry D

Aug 10, 2012 at 15:58

Somebody told me that the length of time you've been wih a bank helps with credit rating. Is this true? I have £500 (but nothing else) languishing at Lloyds Bank after 45 years with them. Will it reduce my rating if I close my relationship with Lloyds entirely, given that I've been at my current main bank for a shorter time?

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Paul Barrett

Aug 10, 2012 at 17:09

It can make some difference, but why not open bank accounts with all the banks and set up SO to whizz round them all.

This will mean after 3 years you will have say 10 wel funded bank accounts.

Faster payments makes it even easier now to work the sustem.

The computer can be beaten easily.

I did it for about 15 years and got loads of credit out of them.

Remember the current account is the window to your financial situation as far a bank trying to flog you stuff is concerned.

It is easy to set up accounts with multiple banks to prove you are a high net worth individual.

Remember if you have a £1000 overdraft and choose to manually work the system, you can do faster payments between your bank accounts on the same day and providing the overdraft monies are back in the origin account no overdraft interest is charged.

IO built up massive overdraft facilities and just had to sit on the computer for a few hrs a day.

I was worth it as I built up credit card card limit and was able to invest in property etc.

Things are a lot tighter now but it is always worthwhile having multiple accounts just incase your main account is mucked around by the bank.

Always have fallback positions.

Sometimes they close accounts down.

Leave it 6 months. apply again. I did this sev eral times and it resulted in me obtaining even bigger overdrafts with them than with the previous accounts I held with them.go figure!?

Always be in the position where you are in control and not the banks.

Banks exist for you to make profit out of them not the other way round.

I made loads out of all my facilities.

Of course the banks made some profit aswell; but nowhere near as much as I made.

Anyone with a little bit of application can do the same.

It is not rocket science.

Indeed I got ungraded in maths at CSE level, so if I can do it, anyone can!!

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Bob saxton

Aug 10, 2012 at 20:41

APR seems to be a pretty straightforward concept. Annual percentage rate.

It is in reality a form of smoke and mirrors.

Spread sheet programs have a mathematical function called PMT.

This stands for Principle, Monthly rate and Term. If you use this to produce a table of payments for a loan, you will find that when you have paid off all the interest, and the principle on a bank loan you will still have a lot more repayments due. I queried this with a Building Society and took it up with trading standards. They told me that you cannot calculate APR. As I have a fairly high standard in maths I questioned this. I found tha APR is a found using arbitrary tables and there is no calcultion for it. Futhermore there are arbitrary and unknown ingredients in it. This is why two lenders offering

a £1,000 loan at 5% for a year can quote two different APRs.

Bob the electrician

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Peter Lawless

Aug 11, 2012 at 14:36

I find that Experian affects my credit most of all !

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Jon

Aug 14, 2012 at 14:22

Bob - APR is an absolute measure and can be found for any loan irrespective of the repayment schedule. A simple way for a complex loan is to use regression on a spreadsheet.

A 5% loan will have different APRs if one has simple interest monthly calculations (5/12%) and the other is annual. Also some lenders calculate the 5% on the balance at a fixed point in a year rather than on the reducing balance.

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C J

Aug 14, 2012 at 17:24

If I default on a loan / mortgage in the USA (Florida) will that effect my credit rating in the UK?.

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Jonathan

Aug 14, 2012 at 17:50

If you rent a property out can you check the credit rating of the person who wants to rent it?

Do they need to sign something to say you can do a credit check?

Can you credit check anyone if you know their name address and DOB?

Where would you go to do the credit check on them?

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Paul Barrett

Aug 15, 2012 at 04:13

Easy phone discountlettings.co.uk and carry out a RGI check on the applicant.

They will be contacted by the RGI company who will then advise as to whether the person has passed.

Cost for 1 tenant or a guarantor RGI check

£10

Then you can take a policy out for £89 for 12 months for up to £50000 inc legal costs per claim.

You can make the tenant pay for the policy under admin fees.

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Bob saxton

Aug 15, 2012 at 11:39

Jon, Thank you for your reply and explanation there is nothing absolute about APR , if there was you could calculate it. You mention variables, there are many more. Regression analysis to find the best fit line to a spread sheet curve is a very tortuous path. The most direct and informative way is using the

Principle, monthly rate, Term f(PMR) function. Then you can see how you are being ripped off.

A story is told, and I am sure is well known, of candidates for an accountancy job who were asked "what is two times three?" Those who replied six were told that they might be contacted but never were. The winning candidate asked "What would you like it to be?"

I stand by my statement that it is all smoke and mirrors.

Bob the electrician

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normski 2nd

Aug 15, 2012 at 16:04

I had my credit rating blackened over a disputed £11 bill, not that I am worried at all, in fact I think its a good idea , its cut down a all sorts of junk mail etc. also it gives the impression that you are skint and troublesome. I is extemley unlikly that I will ever need credit again.

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Paul Barrett

Aug 15, 2012 at 16:23

If you have a dispute you may apply a notice of correction which will indicate that the negative entry is not to be relied upon.

Letting incorrect negative info remain on your file is asking for trouble.

Believe me you need a decent credit file irrespective of whether you want credit

Insurance monthly payments, forget it

contact mobile phone contract, forget it

mortgage, forgert t..

Sign up for the MPS to stop junk mail, simple to do.

Remove yourself from the edited electoral roll.

No more addressed junk mail.

Don't allow a disputed bill top possible desroy your credit file for 6 years

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Jon

Aug 15, 2012 at 17:26

Bob - I can calculate the APR of any repayment schedule

Your old joke about the accountant has nothing in it to support your case.

But, of course, when comparing APRs one does need to check whether fees etc are included.

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Bob saxton

Aug 15, 2012 at 20:43

I am an electrician and also a microbiologist. I do not have a degree but I have qualifications in both these subjects. To support electrics I did maths and calculus including differential equations particularly as required for control systems. As biology is not an exact science I did statistics covering regression analysis, Student's, the pen name of the statistician Gosset, test and Chi test for agreement of data with known laws.

I also trained students in the use of computer packages, word processing, Databases and Spread sheets. As an exercise I used an advertisment for loans from a leading building society and did a spread sheet for repayment of one of their loans. Using the PMT function I produced a table of montly payments, the debt remaining and the interest paid. This gives a straight line graph. After four years the debt has been repaid and the interest. According to the advert. you still had another year of repayments to make. I queried this with the building society and they assured me it was in order.

I went to Trading Standards and they told me that APR cannot be calculated but is obtained by reference to tables a copy of which they gave me. These tables are not like trig or log tables that anyone can calculate and if they are correct they will get the same values as everyone else.

No one will tell you how APR tables are obtained.

With respect I don't know how you can calculate APR if the component costs,charges and the way that interest is charged are unknowns

I remain convinces that APR or Annual Percentage Rate, is a misnomer and a deliberate device to mislead the borrower.

The old joke is one that everyone should know if they are concerned with finance and I would suggest that this is augmented by reading Accounting for Growth by Terry Smith. Subtitled, Stripping the Camouflage from Company Accounts.

If you wish to continue this I am on Twitter and Facebook

Bob the electrician

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fred williams via mobile

Aug 20, 2012 at 10:45

Does unpaid insurance premium affect your credit rating after you sold the vehicle midway into the contract.

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hopalong cassidy

Aug 20, 2012 at 12:43

If I do not have the cash to purchase an item then I will not buy it. This world is full of people that "must have". Try saying, do I need this. Can I live without this.

If you use a credit card to purchase an item you double the cost . The money you should have purchased the item with you now spend on other items. Therefore you have doubled your cost. In addition you have lost the chance to barter for a better price using cash.

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Paul Barrett

Aug 20, 2012 at 21:17

No hopalong you do not understand how to work the system.

You should always use a credit card whenever you wish to purchase whatever providing you don't mind leaving a trace for any authority to trace and would not receive any price reduction by paying cash which would save you more than the interest earned on that cash in a savings account or offset against a debt like an overdraft until the card bill is due.

Only a fool doesn't use a credit card if none of these circumstances applies..

One should ONLY spend on a credit card providing you can pay the balance off in full by the min payment date.unless you have a 0% deal in which case you should put the money to pay the bill off in a savings account or offset against an overdraft debt.

Aso you can use a card to buy stuff you haven't got the money to pay for it.

If you time it right you could have up tp 56 days to earn the money tp pay the bill off in full if doing so would prevent interest charges.

Also lots of businesses are funded by credit cards which is a breach of the terms and conditions of ther card, but who care.

Thousands of businesses have been started on credit cards as the stupid banks won't lend to small business..

What you need to bear in mind is that there is NO such thing as unsecured credit , despite what any bank might say.

This is something to consider when you go mad spending on cards.

If you don't pay them the card company will come after your wages or your assets, including your home. and also any traceable savings.

Using a credit is using other peoples' money for cashflow purposes at ZERO cost to yourself if paid in full by the MPD.

This is how credit cards should be used.

People who use cards to spend above whatever they can earn and is disposable are heading for a fall.

This is how card companies mkae money out of these fools.

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hopalong cassidy

Aug 21, 2012 at 08:42

Hi Paul B. I was talking about the fools not the wise.

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