Good evening folks, Dr Ro here and what a day it’s been.
Not sure where you are where you are watching this, but if it’s been anywhere near the United Kingdom I’m sure you’ve been enjoying this incredible heat. Albeit for some people it might be too much.
Speaking of heat I have a question, how is the heat on your credit file?
I thought I’d tackle this question.
Just a quick note I am not a financial adviser and this is not financial advice. Please go and seek independent financial advice regarding your financial situation. What I’m going to share with you is based on my experience and not to be acted upon.
The subject really is what impacts your credit file?
Bearing in mind that I’ve been in the field of property investing for about 20 years now, teaching people for almost as long, and having travelled over the world places like Australia, New Zealand, Singapore, Malaysia, states, Canada, it’s a common subject that people raise.
I can talk to you about the UK as that’s the simplest thing to do at this stage.
What I would say is for anyone watching this one of the first places to go and visit is check my file.com. If you’ve not done this before it’s a great website which is not a credit agency, but it is a company that looks at your credit files and there are four primary agencies.
The key thing at this stage is I want to share with you a few things that you may not be aware of that actually affect your credit file and these are things that you might not be aware of because most people think it’s to do with their spending habits or their lack of payment habits, or the poor payment habits.
How they’ve maintained loans, credit cards, mortgages, any payment plans, and hired all of that type of thing that leaves footprints on your credit files.
Most people are of the opinion that I’ve looked after my credit file. I haven’t got any late payments. I pay everything with cash and not a credit card which by the way, if you do your own research may not necessarily work in your favour if you want to build a credit history because remember it’s a credit file, not a bank debit account file.
When you get a credit card, if you use a credit card you’ll notice typically the use of a credit card after three to six months they increase your limit. Someone that has a limit of 10, 15, £20,000 for example, who doesn’t use that credit card that credit limit comes down so part of your actions as a person with a credit card is the system tends to look at your spending behaviour.
Based on your spending behaviour it will lift your limit potentially because you’re using the card but equally if people are not using their card it comes down as well. If you don’t use it, you lose it.
What I want to share with you is more the non-financial aspects that affect your credit file.
The first one is the spelling on your name, so if you’re watching this and you’re oblivious to this if you have a spelling like my surname is Weerasinghe. Hence Dr Ro it is easier. Weerasinghe can be spelt without the e or with an e.
I’ve had situations where the spelling on my surname on a credit card or a loan or mortgage application or even on my electoral register is incorrect and that has brought my credit score down. The biggest drop I saw with this impact was from about 900 and something down to 332.
Your credit score typically and again it varies from credit agency to credit agency is typically 1 to 999. If you look at it as that average. One being crap 999 being amazing 600 being okay, 700 being good, 800 being very good, 900 and above excellent.
If you have a 900-credit score and then you go in an application for a loan for example, and they happen to get your name on your credit card application wrong and it goes on to your credit file now, because the system is looking for consistency, it’s looking for is this person actually this person.
For example, Bill Smith could live in a house with Beryl Smith or Bethany Smith. Bethany Smith may be the wife and Bill Smith might be the husband. Bill may have a great credit file but Bethany and this is the second area by the way, Bethany, his wife actually has a poor credit history. She’s been late on a payment.
Because she is linked to him or because her name is so similar to his it might be that the B Smith on his credit file isn’t him but is actually his wife and this confusion happens all the time.
In the same way Smith could be Smyth or Smith but that spelling can affect your credit file.
Ultimately when you go for a loan application they want to know that you are the person that’s applying. If there’s a person on your credit file with a slightly misspelt name that can affect the footprint and question whether you have a good spending habit. Whether this is really you as they’re looking for a clean credit file.
Essentially, the right spelling with everything that’s the spelling of your surname, your middle name and your first name as well. If you’re married and you’re a woman, for example, you have a double barrel surname, but your maiden name is single barrel Smith Jones for example versus Jones as you were before then that will affect your credit file as well.
A simple misspelling on your credit file will bring your credit score down by two or 300 points that will have a dramatic effect on mortgages that you’re going for if you’re a property investor. If you’re a property investor and you haven’t looked after your credit file you’re in trouble. That’s going to affect the type of mortgage you can get. You may find for example you get a lower loan to value or you might get a mortgage with a higher interest rate, or they might say we’re not going to lend to you.
Second one is address details.
So where have you lived in the past. If you happen to have a street you lived on in the past, but you spelt that wrong Lordship Lane versus Lordship Street and you had a loan against Lordship Street again your credit score will come down.
They’re looking for consistency in all the spelling and the locations that you lived and that includes by the way, the addresses, and the dates you lived at those places. That is another huge one. Maybe across three you get it slightly differently that lack of details and lack of attention to detail will affect your credit file because ultimately, if someone is lending to you they want to make sure you are that person.
You’re also the person who lived at this address. Because what if two B Smiths lived at that address and one B Smith also lived there in June 2001 and another B Smith was born in April 2001. All these little things make a difference when you lived there, the address, your surname.
The last one is who you live with. Let’s say Beth and Bill both have amazing credit scores, but their son Brian Smith who is 22 has taken a car loan being late on his payments also had two credit cards which he neglected to pay off and now he’s got black marks.
They live for six years in his credit file. So now Bill and Beth come to a property training with Dr Ro, for example, they do a three-day property training. They decide they want a coach but they then go to get a mortgage. The mortgage brokers go you’ve got problems on your credit file Bill and you have as well Beth. Some late payments.
So Bill goes back and looks through all his files and he goes I don’t understand it. oh wait a minute it’s our son Brian.
They check Brian’s files and sure enough Brian hasn’t made his payments on his credit files in time.
Now Beth and Bill’s credit file is affected directly by Brian their son.
My point is that if you live with children who are credible and they can get a credit card, you may need to have a look at their credit files because it will affect your own credit file, your mortgage applications and, of course, if you’re building a business it involves you getting loans out, a lot people get turned down because they don’t take time and put the due diligence in their credit files.
My three tips hopefully they were useful.
On that note I’m going to sign out.
Disclaimer: This video or written publication does not offer investment or financial advice and nothing in them should be construed as investment or financial advice. Our publications provide information and education only. The information contained in our publications is not, and should not be seen as a recommendation to use any particular investment strategy. Always seek financial advice from an independent financial adviser around your own personal financial situation.