The UK credit score is a complicated beast, pulling from various aspects of your financial and personal history to decide whether you represent a "safe" financial investment. It's checked by everyone from banks to letting agents and from mobile phone companies to potential employers. Your credit score can affect everything from the chances of you buying a house to the chances of you getting insurance.
It's easy to think that because you have a job, a home, and no history of debt, that your credit rating must good. Unfortunately, it sometimes doesn't work like that, and often you don't find this out until it's too late. For many people, particularly those in their 20s, the major reason for a low credit score is because they can't be properly identified. Without realising it, you've laid a confusing paper trail, which in some cases means you can't be found at all. How do I know? I've been there.
In order to check a credit score, companies look for an identity attached to a certain address. When you open your first bank account, you begin your very own personal financial timeline. Every new address and new credit agreement (including things like phone contracts and store cards, not just credit cards) adds to your credit score.
Things get complicated when you use multiple addresses or move frequently. Perhaps you're a student, living away from home during term time, but you still get your bank statements sent to your parents' house. You decide to get a new phone contract and use your new address at Uni. Maybe you get a store card because of an offer, but you only use it once, pay it off, and forget about it. You now have two addresses attached to your credit statement/score. Say you graduate and move again (your parents act as guarantor on your rental agreement). You start paying council tax and utilities bills at this new address. You get on the electoral roll. You move your phone bill to this address, but figure you might as well not change things with the bank, as your parents aren't moving and you've gone paperless anyway. You buy a sofa that you're paying off in instalments (yup, that's another credit agreement). By this point you've completely forgotten about that old store card.
Now your name is associated with three properties over a short space of time, and you have bills associated with multiple addresses. This confuses the system. At this point, perhaps you decide to apply for a credit card for emergencies. The only problem? You're rejected instantly because your credit history doesn't match the information you've given. The system is confused by multiple addresses and a timeline that doesn't make sense.
Trust me, I've been there. I did all the above and lived to tell the tale and now have a credit score that is "excellent".
So how did I fix this? First of all, I made sure to change my address on absolutely everything as soon as I moved house and cancelled store cards I didn't use any more. I got a credit card from my bank (who knew my true financial history) and spent small amounts on it frequently, always paying it off at the end of the month. I stayed put in one place for a couple of years, so I had a series of "clean" months on my report. Credit reports usually consider the past six years, but even simple things, like making sure you're up to date on the electoral roll, can add points to your score.
I also made sure my name was on the majority of the bills at my shared house and paid by direct debit for everything so I knew I'd never miss a payment. Missed or late payments will show on your report for at least three years, even if your balance is tiny, so keep a close eye on any accidentally accrued interest (especially on store cards: just say no).
When my credit score was looking a little healthier, I applied for another credit card, and used this one in the same way as the other: small spends, paid off in full. Now I had a strong history of paying off debt, and I had multiple credit agreement associated with one address for a period of longer than 12 months. I moved twice more, but always followed my own strict rules to move everything quickly and efficiently (even if that meant long frustrating calls with British Gas and BT). I also signed up with a service that allowed me to see my credit report for myself (Experian and Equifax are the most popular). This gave me at least a little control: I could see when my credit score changed and what that correlated to. This comes at a cost (Equifax is around £15 per month), but as I've applied for a mortgage five times over the past five years (long story) it's been invaluable.
Personal finance might not be fun, and nobody likes spending hours updating records, but take the time now, and it'll pay dividends in the future!