So you think you don’t have a credit history …
An acquaintance said to me – rather smugly – the other day, “I don’t need to check my credit score, because I don’t have a credit history.”
“Oh, you don’t?” I said. “Have you checked it in the past and discovered you didn’t have a profile in the system?”
“No,” he said. “But I’ve never had any hire purchases or a car loan, so they won’t have anything on me.”
Many people think that a credit history is built solely from credit such as hire purchases, or from bankruptcies or court judgements. And indeed, when you go bankrupt or have a court judgement against you, or you default on something like a hire purchase payment, that goes onto your credit history.
Naughty stuff like this is what we call ‘negative’ information. But now there’s also ‘positive’ information, or ‘comprehensive’ credit reporting. That means that a lot more information now goes into your credit history.
“Do you have a power account in your name?” I asked. “What about your smartphone, and your home internet? Ever applied for a tenancy?”
Sure enough, it turned out he’s got all of these (and more) in his name. So I pointed out that it’s almost certain he indeed does have a credit history, because when you apply for power, phone, internet accounts (and so on), you check the ‘terms and conditions’ box, allowing that company to a) do a credit check on you and b) supply your payment history to credit reporting agencies.
All these things go into the calculation that makes up your credit score. So as you make payments each month, that information helps to show how financially responsible you are, and it gives companies an idea of whether or not you’ll be a good customer for them.
On the flip side of the credit coin, what doesn’t go into your score calculation? Well, assets, wealth and income aren’t part of your credit history. You could own umpteen properties, earn squillions, have loads of money in the bank but have a bad bill payment history and have a credit score that’s in the mud. Or you could be financially poor and have an excellent credit score, because you’re meticulous about paying bills on time.
It’s all about how well you manage your finances.
