On this episode of the ReadytoBuy Podcast, I explain the difference between 'credit scoring' and your 'credit file', why your credit score isn't the be-all and end-all and talk you through obtaining an AGREEMENT-IN-PRINCIPLE, what it is and why you'll need one!
Time Stamps PART ONE 00:00 – Introduction 01:38 – ‘Credit Scoring & Your Agreement-in-Principle’ 03:15 – The Difference: Credit Files 06:37 – The Three Credit Agencies 09:28 – Monitoring Your Credit File 11:11 – Recommendation for ‘CheckMyFile’ INTERMISSION 11:52 – ‘Definitely Not A Silly Question’ Segment 12:21 – “Do I have to proceed with the lender that I get the Agreement-in-Principle?” 12:28 – Answer 13:09 – Contact Info for Questions 13:35 – Risk Warning PART TWO 14:12 – ‘What is An Agreement-in-Principle?’ 14:12 – Defining It 14:47 – Factors That Make It Up 16:44 – Nature of the Agreement 18:06 – ‘Full Application’ 19:25 – Two Really Important Purposes 20:52 – How Long is it Valid For? 21:30 – Word of Warning
22:21 – Conclusion –––––––––––––––––– Notes (00:00 – 01:37) Introduction Website: http://www.mhcmortgages.co.uk/ (www.MHCMortgages.co.uk)
(01:38 – 03:14) ‘Credit Scoring & Your Agreement in Principle’ Recap of last few episodes - putting your plan in place and getting yourself as presentable as possible. You're almost ready to go out and start looking at properties! But, before you do, I would recommend getting something called an ‘agreement in principle.’
(03:15 – 06:36) Your Credit Score & Credit File I’d also like to discuss the difference between credit ‘scores’ and credit ‘files.’ Having a good one for both is great, but I would argue that a good credit score is slightly less important than a good credit file.
Credit Files Your credit file contains all sorts of information about your credit agreements (e.g. loans, credit cards, car finance, store cards, phone and utility bills) and these will detail things such as payment history, balance, name of the lender, how well you’ve conducted it, credit limits, etc. It will also show if you are on the electoral roll and address history. Aliases will also show up on the credit file, if you've been known by different names such as maiden names, previous names, etc. If you’ve ever had a joint credit agreement or joint bank account with someone, it will show up and link you with that other person, even if you are no longer affiliated. It doesn't mean that it would adversely affect you if they had conducted their credit poorly. Things relating to courts also appear, such as a County Court Judgement. (Also known as a CCJ) Your credit file will follow you and go back for six years. If you miss a payment, for example, that will show up for this length of time and shows the importance of being careful. If you apply for credit, the credit lender can request to see your credit history to make a decision on whether they would like to lend it to you. There are two different kinds of credit search ‘footprints’ that I see – a ‘soft’ footprint search and a ‘hard’ footprint search. The difference between these is simply that a soft footprint CANNOT be seen by a credit lender whereas a hard footprint CAN. (You can see all searches, soft and hard, when you view a copy of your own report) A one-off hard footprint credit search isn't usually a problem, but multiple on your record in quick succession may show that you are desperately trying to access credit, which in turn could reduce your chances of being accepted by a lender.
(06:37 – 09:27) The Three Credit Agencies The three main credit reference agencies in the UK are: Experian, Equifax and TransUnion. These are all separate entities that hold info about you that credit lenders share with them. It’s important to note that the three agencies use a different score to each other, so your credit score would vary depending on which agency you go to....