MONZO customers will soon be able to check their credit score for free via the bank's app.
It's the first bank to offer this kind of service for free and hopes that it will help customers keep track of their credit history.
Banks and lenders look at your credit score before deciding whether to let you borrow anything, such as loans, mortgages and credit cards.
They give an insight into how well you cope with borrowing, and more importantly, whether you're any good at paying it back.
A low score suggests a riskier borrower and could mean that you're offered less cash, higher rates or even see your application rejected.
Normally, customers have to pay up to £14.99 a month to subscribe to one of the three credit referencing agencies – Experian, Equifax and TransUnion (formerly Call Credit) – to get a detailed credit report.
How to check your credit score
HERE'S how to check your credit score
You can request a one-off statutory credit report for free from all three credit reference agencies listed below.
For on-going monitoring, here's what the three credit reference agencies provide:
- Equifax: You can check your score and report for free for the first 30 days, after which it's £7.95 a month.
- Experian: You can check your score for free using its online service. But if you want to check your report itself, you can only do this for free using a 30-day trial, after which you'll be charged £14.99 a month.
- TransUnion (formerally Call Credit): You can sign up to its Credit Karma service for free to get unlimited access to your report and score for life.
You can also check your credit score for free using the following third parties:
- ClearScore: ClearScore uses Equifax's data to provide both your score and report free forever.
- MoneySavingExpert.com: This tool uses Experian's data to provide your score and report for free forever.
Some agencies offer a free 30-day trial or a limited view of your score if you don't pay to subscribe, but you often won't be told about how you can improve it without paying a fee.
The digital bank says it will roll out a feature on its app over the next couple of months that will show you your score and give tips on what it means.
Barclays offers a similar feature in its app but users have to pay £5 a month to access it.
Different agencies use different scoring systems – Experian will rate you on a scale of 0 to 999, Equifax from 0 to 700 and TransUnion from 0 to 710.
Some lenders only check your name against one of the agencies, so it's still important to check your history with all three before applying for credit.
Monzo will only show you your TransUnion credit score, but it will also offer tips to help you improve yours, such as recognising that you're not registered to vote.
Customers will also be given guidance on whether they're likely to be accepted for credit if they were to apply for it now.
There are a handful of third party services, such as ClearScore and TransUnion's Credit Karma, that will let you view your score for free in a similar manner.
How to boost your credit score
WHILE there is no credit blacklist which bans people from any sort of borrowing at all- if you have struggled in the past you may find lenders won't consider you.
If that's the case then there are steps which you take to help improve your rating:
- Get on the electoral register. This proves who you are and where you live meaning it's easier to get credit if you're on the list. Also check the electoral role for any errors. You can sign up by registering to vote.
- Don't make too many credit applications. Making lots of requests in a short period of time can be seen as a sign of financial distress – and each application will be recorded on your file. Use a "soft-search" eligibility calculator to show how likely you are to be accepted.
- Always pay your bills. Late payments are also recorded on your file so make sure you pay your monthly bills on time including utility and credit cards.
- Pay down your debt. Try and cut down your existing debt before applying for new credit as lenders may be reluctant to lend to you if you already have a large amount of debt.
- Use a credit-builder credit card. These cards tend to have high interest rates compared to normal cards but if you can show you're a responsible spender with them, it can improve your chances in the eyes of lenders.
But often, these firms recommend credit products from companies they have a commercial link to, even if they're not the best for you.
This isn't something Monzo says it is working towards, but it's always important to be aware and do your own extra research outside of the app.
In a blog post on the bank's website, Monzo said: "Some of you have told us that you don’t know what credit scores mean, why they’re relevant or what they could actually affect – so we’re really excited to start showing your score and what it could mean for you."
Having a poor credit score can push up your bills – motorists could be paying up to £1,100 more a year for their car insurance because of it.
It can also add £262 a month to your mortgage repayments but there are ways that you can improve it to get a better deal.
That's what Ben Link did to help him get on the housing ladder despite racking up £8,500 worth of debt from personal and payday loans.
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