Credit history: are you financially 'invisible?

Six million of us are classed as ‘financially invisible’. Are you one of them and, if so, how can you get yourself back on the financial radar?

A whopping 5.8 million of us in the UK are ‘financially invisible’ according to credit reference agency Experian.

This means we’re missing out on the best deals and rates, simply because lenders don’t know enough about our financial track record.

“The impact of being financially invisible is a low credit score and limited borrowing options at competitive rates”, says James Jones, head of consumer affairs at Experian.

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What’s the problem?

When you apply for credit, say a credit or store card, mortgage, loan or mobile phone deal, a prospective lender checks your credit record.

This is basically like your financial CV.

If there’s little or no information there, you run the risk of being turned down or offered a poor deal.

A typical example is credit cards.

You may spot a headline ‘0%’ deal; yet as only 51% of successful applicants have to be offered the advertised rate, you could be offered the card, but with a more expensive interest rate attached.

Who is affected?

It’s not just young people and those on a low income, and it can be easier than you think to be cash rich, but poor in the credit score department.  

'Financial invisibles' can be anyone from those in their twenties who are renting, (as until recently rental payments didn’t show up on your credit record), to those in a long-term relationship where one partner handles the finances or older people who may have paid off their mortgage and have a limited need to borrow.

If you’re in a relationship where one of you ‘manages the finances’ and has their name on the bills, you can easily find yourself on the financial sidelines if the relationship ends. 

The ‘average’ age for divorce is 46 for men and 44 for women, according to the Office for National Statistics, which can mean, mid-life, you’re suddenly scrabbling around to convince lenders you really can manage your money if you want to secure a bank account or mortgage in your own name.

You may have been frugal with your spending on credit cards in the relationship, but if you’ve only been a secondary cardholder, there won’t be any trace of your spending and repayment habits, however savvy you are.

And with mobile phones, you may have forked out regularly to buy a new handset on a Pay As You Go Deal, but unlike a contract deal, this won’t show up on your credit record.

You can’t ‘share’ credit scores, so it’s important to build up your own.

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How to build up your credit record

You can’t do this overnight but there are some easy ways to start creating your own financial footprint.

For a detailed strategy, head this way, but here are a few top tips to get your score moving in the right direction.

Get on the electoral roll

“This helps verify your name and address to banks and other lenders and can help your credit score”, says James Jones.

If you’ve moved, don’t wait for the annual voting registration form to come through.

Get in touch with your local Electoral Registration Office.

Put bills in your name

Have household bills like energy, broadband and water in your name, as many providers share payment information with the credit reference agencies which can boost your payment history.  

And make sure you pay bills on time; as a late payment can count against you, so set up a regular direct debit.

Pay your rent on time

If you’re renting, whether privately or in social housing, opt into the free Rental Exchange scheme which makes a note of your payments and boosts your credit score.

Get a credit card

Even if you don’t feel you need one, it can be worth getting a credit card.

“Use it for occasional purchases each month, keep the balance low and repay in full every month”, says Jones at Experian.

The trick is to only apply for a card you’re likely to get, which can be easier said than done.

If you jump in, go through the full application and get rejected, this leaves a footprint on your credit file which can affect your ability to get credit in the future.

But if you do a ‘soft search’ first, you can check out your chances of being accepted before you apply.

Some credit builder cards will even let you earn cashback or rewards, so it can be doubly worthwhile using it.

Get a mobile phone contract

If you’re on a ‘Pay As You Go’ deal, this won’t leave any record on your credit file.  So unless it’s going to leave you out of pocket, worth considering a contract deal if you can.