Credit rating nose dived after selling house and settling mortgage!

MovingOn1308

Hi there, this is my first post! I hope it's in the right place. Here's a bit of background - my husband and I took out a Trust Deed in December 2011. It was supposed to be paid off in 3 years however, Half way through I fell pregnant and our son was born with severe health complications. I took alot of time off then returned to work part time. We halved our trust deed payments and finally in February this year we were discharged! We sold our flat recently and have moved into my parents house while we take time to save and find the perfect wheelchair accessible house for our son. Since settling our mortgage after the house sale my experian credit score has fell 68 points from Fair to Poor.
We officially dont have any debt having paid everything off, our car is also paid off. We do have mobile phone contracts and in the last 2 months we applied for credit cards which we pay off in full every month - the application for credit also hit our credit scores.
We want a mortgage in the near future so we are looking for any tips to help improve our score. I do have defaulted accounts showing on my credit score which now show settled but still have a negative impact on my score. I hope by December this year they will drop off aswell as the record of our Trust Deed. Does anyone have any advice on how to build from here? Will it improve in time?

Thanks in advance!

[Deleted User]

Credit scores hate change. So any new credit, closing credit, acquiring debt, clearing debt, will drop the score.

That's why you ignore them and get on with your life. No lender will ever see or care about your scores. Just maintain good credit history.

Fireflyaway

My score dropped when I settled our mortgage too. It dropped when I took out a credit card, went up when I went on the electoral role, went down when I increased my overdraft, went up when I paid off an old credit card, went down when I applied for credit, went up when I decreased the overdraft! You get the picture! Try not to make any changes and it will probably improve. Mine went from 94 to over 250 with clear score in a year so hang on in there and don't stress about it.

Pixie5740

From the very top thread on the board.

“
on what your credit score really means

By Martin | Edited by Johanna




If you've paid to get a credit score from one of the credit agencies, how reliable is it? We run through the truth about credit scores.

I’ve just found out that my credit score has dropped – should I be worried? Right, hold on there for a second. Actually, you don't have a credit score in the UK, you don’t have a credit rating, and there’s no such thing as a credit blacklist.
So, when you say your credit score has dropped – what exactly do you mean by that?

Well, I paid a credit reference agency to check my credit score and it's dropped. OK. So you went to one of the credit agencies – Equifax, Experian and Callcredit – and paid them a sum to get your 'credit score'. You'll get a score up to 600 from Equifax, up to 999 from Experian and up to five from Callcredit.

That's very common, and it's common to be confused about exactly what this is.

So I do get a score, but it's worthless? What you have to understand is this score doesn’t really mean that much. The first thing you need to appreciate is when you apply to a lender is that it will judge you based on three criteria.

Firstly, your application form details (which the credit reference agencies don’t have). Secondly, any past dealings you’ve had with that lender (which the credit reference agencies might not know). And thirdly, the information contained in your credit reference files (which the credit rating agencies do know).

So, the first thing to understand is that this score is based on incomplete information. The next thing to understand is different lenders are looking for different things, so they score you differently.

Just because one lender rejects you doesn’t mean another lender will do the same. The idea that this is all based on some simple score given to you by one of the credit reference agencies is false. At best, it's just an indicative guide to roughly how good or bad a risk you are.

In that case – why do they sell it to me? Well, the key word in what you’ve just said is ‘sell’. They sell it to you. Credit reference agencies used to make all their money from selling data to lenders. The idea was to help lenders predict your behaviour, which allowed them to assess whether or not you were a good person to lend to. They do that by deciding not just if you are a good or bad risk, but if you will be profitable or not.

Then some bright spark at the credit reference agencies realised they could generate a business called 'credit management'. It meant they could start to sell you all the other sorts of data and monitoring products for the first time and start making money from it. You ask why they sell it to you – well, it makes them money.

Does that mean it’s completely worthless and I should ignore it? No, I wouldn’t go that far. It's a loose indication of your rough creditworthiness, and certainly it's worth looking at the things they say are blemishes to see what you can do to improve your credit.
Where I think scoring doesn’t work is, for example, imagine you closed a credit card with a high credit limit that you'd had a long time, but didn't use any more. It's perfectly possible that your score would drop because a long relationship means it's a credit card that could give a good prediction of your behaviour.

But it also needs to be understood closing this would count as a positive for some lenders because you had less available credit.
The fact that your credit scorer has decided to reduce the score it gives you because you've cancelled that card doesn’t mean other lenders will do the same. Nor does it mean there's anything wrong.

OK – right, I understand. So what should I do to improve my credit? Well, it's important to think of this like a beauty parade. Just as everybody finds different people attractive – so do lenders.

There are general things you can do to 'rouge' up your credit appearance that make sense everywhere. As this guide's only 60 seconds long, I'm not going to go into that here. Instead, read the full Credit Scores guide.

It's very important to understand – this is art, not science.

What works for one lender won’t necessarily work for another – so there's no tried and tested right answer.

:money:

takman

Fireflyaway wrote: »

My score dropped when I settled our mortgage too. It dropped when I took out a credit card, went up when I went on the electoral role, went down when I increased my overdraft, went up when I paid off an old credit card, went down when I applied for credit, went up when I decreased the overdraft! You get the picture! Try not to make any changes and it will probably improve. Mine went from 94 to over 250 with clear score in a year so hang on in there and don't stress about it.

Like zx81 said you should ignore your credit score, so carrying out actions to try and improve it is very bad advice. If they had followed your advice and not made any changed they wouldn't have applied for credit cards to pay in full every month. This would mean they wouldn't be building up a good credit history to allow them to get a mortgage.

Thrugelmir

Time heals. Behave sensibly and manage your personal finances well. As far as mortgages go, demonstrating a good savings habit will earn you brownie points.

Ben8282

MovingOn1308 wrote: »

in the last 2 months we applied for credit cards which we pay off in full every month

You can hardly have established a history of paying in full every month on cards that were only applied for in the last 2 months!


You have defaults showing on your credit files. You have made recent credit applications (plural). You have changed address very recently. What do you expect?

MovingOn1308

[QUOTEBen8282
“
in the last 2 months we applied for credit cards which we pay off in full every month
Originally posted by MovingOn1308
”You can hardly have established a history of paying in full every month on cards that were only applied for in the last 2 months!
[/QUOTE]

Obviously!!! :wall:

I know its going to take time but we need to start somewhere. Im looking to improve things and maintain indefinitely! We have well and truly learned our lesson but we are also keen to move house to make life with a severly disabled child a bit easier so I was looking for any constructive advice that may help speed up the process.

Thanks to everyone else for your helpful replies x