New Monzo tool could help customers get a mortgage or loan
The digital bank said the service will also explain what a customer’s score means and what they can do to improve it.
The offering will be rolled out from March, but no specific date has been set.
Monzo is understood to be the only bank to offer such a service for free.
Lenders review credit scores when a customer applies for a product such as a loan or mortgage. People with a poor credit score tend to pay higher interest rates or may struggle to get accepted for a product.
There are three main credit reference agencies in the UK – TransUnion, Experian and Equifax. Monzo will use data from TransUnion.
Mortgage lenders typically look at scores from one agency, so it’s a good idea to check your score on all three when applying for a mortgage.
They all provide free reports.
Andrew Hagger, founder of personal finance site Moneycomms, said: “It’s a good move by Monzo and will hopefully encourage more people to understand and keep tabs on their credit score – it’s more important than some people realise particularly when it comes to getting a mortgage.”
How to improve your credit score
- Make sure you’re on the electoral roll – it’s surprising how many people don’t realise this is essential for a good credit rating.
- Pay ALL your bills on time, even a couple of days late can make a big difference.
- Ensure there are no incorrect details on your credit record – check it regularly and if the details are wrong, correct them. People often move house and change jobs without updating their records.
- Try not to use more than 75% of your available credit limit – this is a good practice to adopt and help you avoid over-spending which can result in charges.
- Look into specialist credit card providers which help people build and improve their credit rating – this will help if you have had problems with credit in the past.
- Only apply for credit when you really need it. Applying for more than four forms of credit in a year can lower your credit rating so keep track of what you have applied for and when.
- Do not apply for more than one credit product at a time as each application can have a negative impact on your credit rating. Patience is a virtue when it comes to credit. Waiting to hear a response from one provider might seem frustrating but applying for multiple cards could harm your score.
- Close old credit card accounts and cancel old direct debits – they will still show up on your record if you don’t get rid of them.
- End financial associations with ex-partners. While their own credit rating won’t impact yours, taking out a product jointly with them will.
- Do not take out more than two forms of credit within a six month period – this can make you look more risky to lenders and damage your score.