Money news, advice and predictions for savers and spenders

Be sure you keep a healthy credit score.
Be sure you keep a healthy credit score.

Credit reports underpin much of your financial life, painting a picture of your past and current borrowing habits, and affecting how willing firms are to offer you credit.

Yet new research by The Money Advice Service (MAS), a Government-backed body, has found one in five of us admits to knowing nothing about them, harbouring some “worrying” misconceptions about what’s included in one. The misconceptions include 22% of 2,000 people surveyed having no understanding of what a credit report is for, and one in six (15%) people thinking it’s used to check whether someone has a criminal record.

In fact, a credit report is used by financial firms to help them decide whether or not to lend you money in the first place, then how much to let you borrow and sometimes how much interest to charge. Basically, they can be the difference between you being offered a mortgage or not, or determine how expensive the debt on your shiny new credit card is going to be.

The term “credit” provider doesn’t only apply to banks, building societies and credit card firms either, they can apply to businesses like mail order and mobile phone firms too.

High levels of existing debt are likely to make all these companies more nervous about lending to you — and be warned, missed payments from financial arrangements like personal loans and gas and electricity bills will stay on your file for six years. As a result, nearly one in six (17%) people in the MAS survey said their credit rating has caused them financial problems in the past, such as having difficulty getting a phone contract or struggling to rent a house.

So what can you do about it?

One obvious way to improve your credit rating is to pay your bills on time, perhaps by setting up a direct debit. You could additionally boost your credit rating by getting on the electoral register and by thinking about whether you use all of your credit cards. For instance, having card accounts open that you never use can affect what lenders think, as does being tied in any joint form of credit, such as a bank account or a loan, with someone with a poor financial history.

Even if you’ve been well-behaved with your wallet, it’s still worth making sure there are no mistakes on your report and that no one has used your details to commit fraud, as you can challenge anything that’s wrong. If there’s accurate information on your file that doesn’t reflect your current circumstances, such as if you’ve had debt problems but you’re now back on track, you could think about asking for a “notice of correction” on your report. This is a short statement explaining what happened. Equally, remember a good credit score doesn’t guarantee that a firm will say “yes”, as different firms have different criteria.

MoneySavingExpert.com also has a free-to-use tool which enables people to check the chances of them being accepted for particular cards, but unlike actually applying for a card, this process will not affect your credit rating. The tool is at www.moneysavingexpert.com/BTeligibility.

What can you do... to make sure you get your rental deposit back at the end of a tenancy?

People on average now spend nearly 20 months in a rental property up from just over 16 months in 2009, which inevitably leads to greater wear and tear inside a property before the tenancy ends.

According to the Association of Residential Letting Agents (Arla), who carried out the research, a detailed and accurate inventory can often make the process of moving out of a property go much more smoothly. It says that agreeing an inventory with your landlord when you move in can often be overlooked amid the flurry of activity, but this could be vital if there’s a dispute about items that are lost, damaged or stolen.

As well as taking photos of the property and keeping these on file, it could be worth keeping a written record to explain the state of items. Once again, Arla says its important to get these descriptions signed by the landlord.

Information about who’s responsible for the upkeep of aspects of the property should be in your tenancy agreement, but if you’re not sure, ask the landlord or letting agent and get the response in writing.

The term trivial commutation describes the process of cashing in smaller amounts of pension savings.

There’s been a lot about this in the news in recent days as pensioners’ campaigners have hailed moves to give people more flexibility over what they do with their retirement pots.

Changes announced by Chancellor George Osborne in the recent Budget mean that the amount of overall pension wealth you can take as a lump sum has been increased from £18,000 to £30,000.

Rent, council tax and utility bill arrears often have just as damaging an impact on people as payday loans, according to a new ‘harm index’ designed to reveal the depth of the stress and anguish caused by debt.

Think-tank Demos, which compiled the figures, is pressing for a traffic light rating system, similar to those shown on food packaging to indicate how healthy a meal is, to be placed on all debt adverts and financial product descriptions.

This information could include, for example, the proportion of borrowers who default on or roll over their original loan, the average amount repaid per £100 borrowed and the risks of not repaying, according to its report, titled The Borrowers.

Fresh fears about “sky-high” house prices have been raised after official figures showed the average UK property value has lifted to another new peak of £254,000.

Prices are growing increasingly strongly across many parts of the UK, the Office for National Statistics (ONS) said. House values rose by 6.8% in the 12 months to January, marking the fastest increase in three-and-a-half years, and they are 0.6% higher than record levels previously seen in December.

Campbell Robb, chief executive of housing charity Shelter, says the figures are a “blow” to young people trying to get on the property ladder.

He says: “No matter how hard young people and families work or save, these days most simply can’t keep up with sky-high house prices, and are instead facing a lifetime of unstable renting.

Britons save nearly £750 a year by taking advantage of rewards points, vouchers and special offers.

People living in Scotland are the savviest when it comes to taking advantage of special deals, saving £1,019 per year typically, compared with the average across the country of £742, according to a survey for American Express.

Londoners have typically recouped £708 over the last year through rewards and offers while people living in Wales have made around £714 worth of savings. Those living in the North West said they save the least through these methods, at £606 on average, according to the research among 2,000 people carried out by the Centre for Economics and Business Research (Cebr).