My colleague Laura Whateley, our resident consumer champion, recently tried to help a reader who was worrying about a blip in his credit history. Confusion over an energy bill had resulted in a late payment and a delinquent account on his file. He was trying to buy his first home and anxious that it would affect his mortgage application.
His story is not unusual. The three main credit reference agencies — Experian, Equifax and Callcredit — collect information about a person’s payment behaviour from a range of sources. Any missed or late payments, including mobile phone and utility bills, can damage your score and colour how you are viewed by lenders. ClearScore, a service that provides access to Equifax credit scores, estimates that about 33 per cent of millennials in the UK have been rejected for a financial product, such as a mortgage, store card or personal loan.
Income is not a factor in determining your credit score, says James Jones, the head of consumer affairs at Experian. “The key is how you manage your borrowing.”
The advice to Generation Rent is to have a credit card, spend little and pay off the amounts each month to build up a credit history; it shows lenders that you can handle money responsibly. This has to be reconciled with not putting in applications for credit too frequently — any hint of desperation will raise eyebrows. To get a foot on the housing ladder, you can’t afford to put a foot wrong.
In Tom Stoppard’s Rosencrantz and Guildenstern Are Dead (I was treated to The Old Vic production this week), coins carry weight: they are currency for the play’s preoccupation with fate and free will. A tossed coin should have even chances of falling heads or tails, yet the coins in Stoppard’s work fall almost exclusively on heads. Millennials, especially those who have saved their pennies for a deposit, only then to have trouble getting a mortgage, know how it feels to have the odds stacked against them.
Can anything be done to turn probability on its head? Aside from setting up direct debits and carefully keeping track of payments, you should provide consistent details on all accounts with a credit facility. Otherwise good payment practice might not be matched to your credit file. And always check your report before applying for a new product.
Spice up your (investing) life
Having written in this column about the gender gap in financial confidence, I was thrilled to receive an email with the subject line “Female millennial investors making confident strides”. It came from the Share Centre, informing me of its latest analysis showing that the number of trades made by women aged 18-36 in Isas has increased by 20 per cent year-on-year. There are also indications of “an increased risk appetite”, with women investing in small higher-risk companies. Don’t mind me while I dig out my Spiceworld album and much-treasured “girl power” posters.
I was sauntering through Covent Garden soaking up a spring-like evening, when a passer-by brushed past, knocking my iPhone out of my hand. It landed face down on the cobblestones. Within seconds the cracks in the screen multiplied.
I then had the choice of paying £40 to replace the screen through a high street repairer (cheaper than the insurance excess fee), or £250 to break my contract early and upgrade to a new handset. As a millennial saving her pennies, you can probably guess which option I went for.