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The Martin Lewis Money Show - Season 16 Episode 12
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00:00The UK's biggest credit reference agency, Experian, is about to tell
00:13millions of its customers their credit scores will drop. If that's you, what does
00:18it mean in practice? Credit scoring is shrouded by grey mist. Tonight I want to
00:24blow them away. I'm going to show you the truth of how it really works, what
00:29you need to do, and I will finish with my crucial key tips to boost your acceptance
00:35odds. Now this isn't just about the obvious mortgages and credit cards and
00:41loans, where credit scoring can even impact the rate you get. Credit checks
00:45may affect things you pay ahead for too, like mobile phone contracts and sometimes
00:51energy direct debit tariffs. Then in my news you can use, new figures out show
00:581.1 million graduates have paid more student loan back than they should have
01:02done in just the last tax year. I will show you how to reclaim hundreds or thousands
01:09of pounds of it. And British savings bonds are about to get better, half price
01:13Christmas trees, a Ryanair warning and cheap theatre tickets. Now to our own
01:17showstopper, Jeanette Kwachi everybody. Thank you very much. I am your leading lady. I'm happy to be back but we want to hear from you so please do send us your questions on X or on threads, use the hashtag
01:31martinlewis or you can email the team martinlewis at itv.com. If we don't use your
01:36question tonight we may use it in a future show. And a huge welcome as always to our
01:40studio audience. Wave your wallets everybody. Wave your wallets. We love that. You're amazing. That's right. So Martin we had an enormous response to your call out last
01:49week saying that people could leave O2 because it's hiking its price hike if you
01:53like. Just wanted to show you a few messages. This is coming from Nicola. She's
01:57ditched and she's switched. She says, I saw your O2 increase information this week,
02:01requested my pack code and switched to a new provider. I got a great offer for three
02:06months, pocketed a saving of £38, £25 a month, £459 a year. New sim up and running O2 boycott.
02:13So if you watched last week you know I got on my soapbox about this. O2 put up the price hike it had previously said when people signed up it would give them. So it's a price hike on the price hike mid-contract. Crucially if you get that notification you've got 30 days in which you can leave and then you might be able to go and save a lot of money and I'm encouraging people to do so because we want it to cost O2 in the pockets so that it never behaves like this again and other companies think we don't want to do that either. Yeah. Sean, he's taking your
02:43advice here and Sean has haggled. He said, I rang up O2 yesterday and after a phone call I stayed with them but saved £34 a month on my two contracts with more data, a huge saving of £408 a year.
02:57Great. Now this is the interesting one because when I told people their rights last week, normally when you're at the end of the contract you can use that as an opportunity to haggle, benchmark the best deal elsewhere, take it to your firm.
03:09But because this is a unique experience, this 30-day notification that you can leave, I wasn't 100% sure it would work with O2 like it would at the end of the contract.
03:18So I asked people to try. Sean is a success and frankly I've had hundreds of other people who've taken this opportunity to go to O2 and say, I will leave you unless you give me a better deal and they've got better deals.
03:28So that's working. Fabulous. Right. Now there is a question though. It's coming from Shirley. It's a follow-up question.
03:33She said, I've seen your item on O2. I just asked for a PAC code and they've come back saying I need to pay the device off in full. Is that correct?
03:41It's very interesting. So a PAC code is a porting authorisation code that you get when you're changing mobile phone number.
03:46Listen, I've seen some of those messages and what actually says it is it does say you need to pay this off in full.
03:53But I think that is a terrible piece of phrasing by O2. I'm going to hope it's accidental and not deliberate.
03:58It's certainly something the regulator should look at. What that means is you're still going to have to pay your handset.
04:05It doesn't mean you have to pay all of your handset now. You were paying it by the month and you can continue to pay it by the month,
04:11but you'll have to pay everything that they owe them on the same plan.
04:13But when they say pay it off in full, it sounds like you have to give them the money now, doesn't it?
04:17It's poor communication, bad phrasing. I hope it hasn't deliberately been done to put people off switching.
04:22If it has, that's something the regulator should look at.
04:24But you can leave O2's airtime plan and keep paying your handset costs by the month, just as you were doing before.
04:31You're free to leave, Shirley.
04:32OK, hopefully that helps, Shirley. Now, I know we're going to get into credit scoring in the show later, the meat of the show.
04:38Something I wanted to ask you first, though, is a question that's coming from Amy O.
04:42Oh, there it is.
04:43I've heard there's a way you can claim back a student loan which you may have overpaid on.
04:48How do I do this and how do I know if this applies to me?
04:50Absolutely. And we've just got brand new figures out on this from the student loans company.
04:55So I'm going to do the first part of my news you can use now.
05:00OK, so the new figures say 1.1 million university leavers and graduates have overpaid their student loans in the 24-25 tax year.
05:09And that adds to at least 4 million people from figures and requests that we've given them for information in the past.
05:14So there could be 5 million of you out there who are owed money.
05:18There are four reasons, but the first reason is the big reason.
05:24It's when you repaid your loan, but you didn't earn enough to need to repay it.
05:28Over a million people in the last tax year did this.
05:30Now, the rules state absolutely plainly, you only need to repay the student loan if you earn over the annual threshold in a tax year.
05:38What your annual threshold is depends which plan you're on.
05:42So we'll hold on this graphic so you can read your graphic as I go through.
05:46I'm going to focus on plan two loans because that's the one with by far the most people on.
05:51England starters, it's when you started university and where you were resident, 2012 to 2022, and wealth starters from 2012 onwards.
05:58Your repayment threshold is £28,470 a year.
06:02You repay 9% of everything you earn over that in a year.
06:04That's how it works. But PAYE, payroll, it takes the money based on your monthly earnings.
06:15So £28,470 a year is equivalent to £2,372 a month.
06:19You repay 9% of everything you earn above that a month.
06:22Let me give you an example and you'll see why so many have overpaid this.
06:26Here we go. So there's the monthly repayment threshold.
06:30Let's imagine maybe you've just started after university and it's the next year or two.
06:33You've had a few months off. You didn't work in April. You didn't work in May.
06:37You didn't work in June. Then you've got yourself a job paying £36,000 a year.
06:42£3,000 a month. Done. Because it's easy maths.
06:45In each of those months, you have to repay 9% of everything above the monthly threshold,
06:50which is about a repayment of £56 a month each month for the remaining 9 months.
06:57Do you understand why?
06:58OK. But now look at this.
07:01Your total tax year earnings were £27,000.
07:06The annual threshold is £28,470.
07:11You earned less than the threshold.
07:15You don't have to repay your student loan.
07:16Here are the payments that you made.
07:18£508.
07:19You can reclaim the £508.
07:21So, this is big for many people.
07:25Who does it tend to most commonly affect?
07:27Well, it's those who only worked for part of the year.
07:30Those who are on commission or those who are on variable incomes.
07:33If your income is going up and down and you didn't earn over that amount in the tax work,
07:37you are able to reclaim.
07:39You use SLC Refund Request Form at gov.uk
07:42or you can do it in your student loan company repayment app.
07:45You can do it for every year except the current tax year
07:48because the current tax year, you'll have to wait till it finishes.
07:51So, for every year before that, you can go and reclaim your money.
07:54Yes, Jeanette?
07:54Just before you move on, we've got a success story on this one and it's a big one.
07:58Have a look at this.
08:01Daniela lives in Loughborough with her husband and two kids.
08:04Being a maths teacher was the career that I was wanted.
08:08I needed to take a student loan to pay for it.
08:10After my initial £16,000, I borrowed.
08:13I also had to borrow another £9,000 to pay for my teacher training.
08:18I've watched the Martin Lewis show for almost seven years now.
08:21There was one show back in November.
08:23Martin mentioned there's over a million students that have overpaid their student loan.
08:27Is that me? Have I ever paid?
08:29He gave numerous reasons.
08:30The one that stood out to me was gaps in employment.
08:34In the last few years, I have had to give up my job when I had my eldest child.
08:37He was born with a brain condition and requires a lot of care.
08:41Once Martin shared that you could possibly have overpaid your student loan, I acted instantly.
08:47It was as simple as log on to your student finance, click manage your statements and click request refund.
08:53Within 48 hours of my application, I was told I got a refund of £2,213.
08:59It was a pinch-free moment.
09:01I was seven months pregnant.
09:03I'm not working.
09:03I don't get an income.
09:04Having that money was really helpful.
09:07I'm so glad I went through the process.
09:10Yes.
09:12Thank you so much for being that firm.
09:14So look, she said a million people have overpaid.
09:16That was the previous tax year.
09:17This is an annual figure and it's still a million people overpaying each year, which is why it's a clarion call for me.
09:22That if you are a graduate or university leaver who's paying your student loan to cheque, you haven't overpaid.
09:27Now, just before I move on, because we came in, there is one thing.
09:31This is a technicality and people ask me about this.
09:33It's a bit complex.
09:35If you overpaid in some months but aren't over the annual threshold, you cannot reclaim.
09:40So this is a negative.
09:41Let me explain that to you.
09:43So here's a scenario.
09:44Someone who earns £24,000 a year, normally standard salary, so £2,000 a month, below the threshold.
09:50We'll stick with plan two again as an example here, but obviously from different plans, the numbers are different.
09:54But then got a £5,000 bonus in December.
09:57So they've got a £5,000 bonus.
09:59Let's have a look.
10:00First of all, their total tax year earnings are £29,000, above the threshold, therefore.
10:07So they repaid 9% in this month of everything above £2,372.
10:14They repaid 400, just over £400.
10:17Now, what you might think is, hold on, they're only £500 above the annual threshold.
10:22They should be paying 9% of that, about £45.
10:25But no, it's done by the month.
10:27They've repaid £400 of their student loan, even though they're only just above the threshold.
10:32And this is complicated, but effectively the rule is this.
10:35You repay your student loan by the month through PAYE, and that is correct,
10:42unless your total annual earnings are below the threshold, and then you don't have to repay.
10:47If you think it seems unfair, that's because it's unfair, but that's the way the system works.
10:51Jeanette?
10:52Absolutely.
10:52I mean, I understood it, but you can move on.
10:56They're small.
10:56OK, good.
10:57You got it.
10:57Right, I've got more for you.
10:59Yes, you're right.
10:59Other reasons.
11:00Let's scroll up.
11:01There we go.
11:02I'll do these ones quickly.
11:03Reason to all much smaller, all in the tens of thousands, not over a million here.
11:07Wrong student loan repayment plan.
11:08If your employer doesn't know which plan you're on, it has to default to plan one,
11:11which is repayments above £26,000.
11:12But the biggest plan, plan two, and all the Scottish plans, plan four, the repayment threshold is higher.
11:18So you shouldn't be repaying as much.
11:19You should only be repaying above this amount, but you're repaying above that amount.
11:22If that's you, call the student loan company here for a refund.
11:25You can't do it online.
11:26Also, go and talk to your employer's payroll department and say, actually, this is my plan.
11:30Please change my setup so I'm paying on the right plan.
11:33Reason three, you started repaying the loan too early.
11:36Nearly £40,000 here.
11:38This is the rule.
11:39You only, regardless of what you earn, you only have to start qualifying to repay the student loan in the April after you leave university.
11:46For most graduates, that's nine months after they graduate, so you leave in the July, the following April.
11:51But if your employer has the wrong details, it can take the money too soon.
11:54If that happens, you can get the money back by calling SLC for a refund.
11:58Good to have your pay slips if you're doing that one.
12:00And the final reason, often get asked about this, is money is deducted after you've fully cleared the loan.
12:07So once you've paid off everything that you owe.
12:09Nearly 60,000 people last year.
12:11The loan's normally wiped after 30 years.
12:13It depends on the plan.
12:14Every plan is different, so you can look that up online.
12:17But the student loan company takes time to notify PAYE, so they don't always stop it on time.
12:22If that happens, you don't need to reclaim.
12:24You will be paid back automatically.
12:26My top tip, though, within the last two years of repaying your student loan,
12:31you can go online at student loan company and ask to set up a direct debit,
12:35so you pay it by direct debit, not through the payroll,
12:38and then you only pay the exact amount that you owed.
12:40And that is where we're finishing, I think, on student loans.
12:43One more.
12:44I know.
12:46I'm so sorry.
12:47There's one more question.
12:48Oh, come on.
12:48It's coming from... I'm sorry.
12:49It's coming from Amy.
12:51Amy says,
12:51Absolutely. Very important question.
13:03Yes, 100%.
13:05If you've overpaid and you get the money back, then your student loan account, you will owe more.
13:10Now, what you may be thinking is, hold on, doesn't he normally say it's best to overpay loans because then you pay less interest?
13:16The quicker you pay a loan, the better.
13:17You are right on normal loans.
13:19Student loans are not normal loans.
13:23For example, those on those Plan 2 loans, the biggest one being repaid off at the moment, the stats show only around one in three people will clear what they borrowed plus interest in the 30 years before it wipes.
13:36Most people will just pay 9% of what they earn above the threshold for 30 years.
13:41So if you've overpaid and you take the money and you're one of those two-thirds of people, lower-to-middle earners, well, you're still going to repay 9% of everything you earn over the threshold for the next 30 years.
13:53So taking that money back is not going to cost you any more in future.
13:55The money in your pocket is better in your pocket.
13:57Now, with other plans, you are more likely to clear earlier because the loan amount's lower and the interest rate is lower.
14:04But what I would still say then is if you need the money, say, to clear expensive debts or to reduce your mortgage borrowing, on the other plans, the interest rate's only 3.2% and student loans have better terms than any other form of borrowing.
14:17You only repair it if you're earning enough and it's going to wipe at some point.
14:19So in that case, you may still be better to take the money, have it in your pocket so you can use it so you don't have other more expensive debts.
14:27But especially those on the Plan 2 loans, the majority of people are better to take the money rather than just to reduce a loan that won't necessarily mean they pay any less in the future anyway.
14:36OK, now...
14:36Do you understand that? Because it's really complex.
14:38Yeah?
14:39OK, I promise you're done now with that, I promise.
14:42Well, you can get in touch. Let us know about your student loan situation.
14:45Does this affect you? Always use that hashtag, Martin Lewis.
14:48But coming next, credit scoring.
14:50How does it work? And what is Experian about to do?
14:53We'll see you in four.
14:53Welcome back. We're live. We're going to be talking about credit scoring in a moment.
15:08But just before that, we're getting lots of reports that the student loan company website and app is struggling a bit, likely because of lots of demand.
15:14It's always what we do on this show.
15:16So be a bit patient, maybe check it in half an hour or an hour or so and it should be easier.
15:20It should be. There's lots coming in over the break. I'm going to sort it all out and come back to it.
15:24But let's go to Jo in the studio. Jo, you've got a question for Martin.
15:27Hi, Martin.
15:28Hi.
15:28Hi.
15:29Yeah, I've heard that the credit agencies are changing the rules, but I don't understand how they actually work in the first place.
15:36Could you explain?
15:37Explain.
15:38I can. And they're not changing the rules, they're changing the score.
15:41Ah.
15:41And the first thing you all need to understand is the difference between your credit score and the credit scoring process.
15:48Don't worry, I'm going to explain in my big briefing.
15:50OK. The truth about credit scoring. The most important thing you all need to understand.
15:58You do not have a credit rating. You do not have a credit score in the UK.
16:04There is no single number that dictates acceptability.
16:09Each lender, when you apply, scores you differently based on its own individual profitability wish list.
16:18Profitability, no, not risk. Why do I say profitability?
16:21Well, in many cases it is, are you a good or bad risk?
16:24But it may be a company that's trying to target people who are a poor risk so it can charge them more.
16:28And for them, poor risk are profitable customers.
16:31So it's a profitability wish list, not a risk wish list.
16:35That's the truth.
16:36Nope.
16:37Yeah.
16:38I was expecting that, because this is what everyone says to me.
16:41But that's nonsense, Martin, because I have paid for my credit score.
16:44I know what my credit score is. I monitor my credit score very carefully.
16:47And I do have a credit score.
16:50Is that what you were thinking?
16:51Yes.
16:52OK. Let me explain. Here you go.
16:55The big credit reference agencies, there are three of them, they will show you a credit score, capitalised,
17:01because that is your credit score, not the credit scoring process.
17:04But they are just their illustration of how a typical lender may view you.
17:11They are not used by lenders.
17:14Now, just to prove my point, TransUnion is out of 710.
17:19Equifax is out of 1,000.
17:21Experian is out of 999.
17:23But that's about to change, so it's out of 1,250.
17:26The fact they're all different tells you something.
17:28Just before I go on, let's explore that Experian change for a moment.
17:32Here's what's happening.
17:33It's rolling out new scores from mid-November till the end of the year.
17:36Some of you will have had notifications today on this particular one.
17:3944% of you will see your band drop.
17:42It might drop from excellent to very good.
17:4442% will get a higher score.
17:46Some may be in a higher band.
17:48But crucially, this shouldn't change anything.
17:51Why?
17:52Because this is just their illustration of how a typical lender views you.
17:57The underlying data is what the lenders use.
18:00Your underlying data hasn't changed.
18:04Therefore, your acceptance by lenders won't change.
18:08We are too hung up on this.
18:10Now, we have a man from Experian here, John Webb.
18:13Thank you for joining us.
18:14John, why are you doing this?
18:15So, what we've done is, as you've explained there,
18:18lenders are looking at the data on credit reports.
18:20We've added in more data into our credit score.
18:23Things like overpaying a mortgage,
18:27reducing your overdraft, taking cash from a credit card.
18:30These are the things that lenders are now looking at.
18:33We've included them into credit scores
18:34so we can give people the most accurate view
18:37of how a lender will view their credit report information
18:40when they apply.
18:40How a typical lender, but every lender, does it differently.
18:43Why 1250, though?
18:44Why have you increased the number?
18:46I don't get that.
18:47I've heard your explanations.
18:47I still don't get it.
18:48So, we did consider staying at the same score,
18:51but actually, the number one thing people tell us
18:54is that they want more information
18:55about how their credit score is calculated.
18:58By moving to the new range of up to 1250,
19:02it allows us to give people more detail
19:03than they've ever seen before
19:05about how their score is calculated
19:07and, more importantly, how to improve it
19:08because, typically, higher credit scores
19:10mean access to more affordable credit,
19:12better rates, better limits.
19:13You're obviously a cleverer man than me
19:14because I can't see how doing it out of 999,
19:17creating it to an arbitrary figure of 1250
19:18when you can just proportion it makes any difference.
19:21But, hey, we'll move on.
19:22So, let me move on a little bit.
19:24Here we go.
19:24Now, the biggest single thing you need to understand
19:27about credit scoring
19:27is the biggest piece of information they miss.
19:29The biggest thing that lenders look at
19:31is on your application form.
19:33It's your income.
19:35Lenders also do affordability scoring.
19:37That isn't in your credit score.
19:39Think about it.
19:39You've got the best credit score in the world.
19:41It's been brilliant.
19:42You've just lost your job.
19:42You've got no income.
19:44You can't afford to repay what you want to borrow.
19:46They are not going to lend to you.
19:48Credit scoring is not the end of the story at all.
19:51So, my big message to you,
19:53you know, people get in touch with me and say,
19:54my credit score has just moved by seven points.
19:55What should I do?
19:57Don't sweat small moves in your credit score.
19:59It's just their illustration.
20:02But do sweat big ones that last longer
20:05because that's likely an indication
20:07there's something more systemic going wrong in your file.
20:10Kevin has emailed you just on this.
20:12Have a look at this.
20:13My energy supply did a hard search on my credit report,
20:16but I decided to switch
20:17instead of after getting a better deal
20:20within the cooling off period.
20:22Does this affect my credit score?
20:23Seems to have dropped a little.
20:25And what can I do?
20:26Well, yeah, it does affect your credit score,
20:27but who cares?
20:29Would be my honest answer.
20:30I've got more detail on that, though,
20:31because this is what you need to consider.
20:33So, we'll just break it down.
20:35What you've got there is a new credit account
20:37or an application
20:38or maybe a cash withdrawal on a credit card.
20:41What happens then?
20:42You'll get a small score dip,
20:44but it'll only last for up to about three months.
20:45And then it'll go back to normal.
20:47It bounced back.
20:47Don't worry.
20:49Listen, it always depends on circumstance,
20:50but this is sort of guidance.
20:52Scale of magnitude.
20:53If you've been applying for lots of accounts
20:55in a short space of time,
20:56that is a more significant problem.
20:58You'll see a bigger drop in your score.
21:00It'll probably start reducing after three months,
21:02and then it should be gone after six months
21:04as long as you don't do any more.
21:06If you've missed a payment,
21:08we're starting to get onto this side now
21:09is the real problem side.
21:11You'll have a much bigger drop.
21:12It'll often go on for six months
21:14after it has been fixed.
21:16So, you have to make sure you make the payment,
21:18and it's only improved
21:19if you're paying on time afterwards,
21:20or it can be even worse.
21:22Now, if you have an arrear
21:24where you are owing money to a lender,
21:26that is significantly damaging.
21:28It can take two years to recover from
21:29and only if you manage to make it up to then.
21:31And then the really bad stuff,
21:33the stuff that is going to cause you problems
21:35with all lenders if you have a default,
21:38a county court judgment and insolvency.
21:41Bankruptcy, IVA equivalent.
21:43It is very significantly damaging.
21:46It can impact your score for up to six years
21:48or possibly longer.
21:49Now, I'm talking here about the credit score
21:50that the credit reference agencies give you,
21:53but that is roughly symbolic of the way
21:55that most lenders would think too.
21:57So, it's both the impact
21:58and the time span of the impact that matters.
22:00In the case of that question,
22:02we've got it in a few months.
22:03OK.
22:03How about this one from Sandra?
22:05She's asking,
22:06My son has a phone contract in my name.
22:08He recently had a late payment on the account,
22:10which is showing on my credit report.
22:12Do you have any advice?
22:14Well, just being...
22:16I need to make this blunt,
22:17and I don't mean to be rude, Sandra.
22:18You have a phone contract you're letting your son use.
22:21Therefore, the debt is yours.
22:23It's on your credit file of yours.
22:25Whatever your relationship between the son,
22:26when you give somebody else money in your name,
22:29it's you that owe it.
22:30The first thing you need to do
22:32is make sure you're paid
22:34and pay on time in the future.
22:36There's very little you're going to be able to do about it.
22:38The truth is,
22:39it's representing a real thing that's happened.
22:41It hasn't been paid.
22:42That's gone onto your credit file.
22:44It will have a negative effect.
22:45That's what credit scoring is all about.
22:47So, you need to just protect yourself in the future.
22:49We can't tidy up things that are real.
22:51We can learn how to correct errors
22:53that shouldn't be on your file.
22:54Let's just ask John,
22:55anything else you can think of that I've not said?
22:57No, it's exactly right.
22:58It's her account, her contract.
23:00So, actually, she's responsible for paying it
23:02or showing up on her file.
23:03Bring it up to date as soon as possible
23:05and keep paying on time.
23:06And like you said, it will improve.
23:07It will improve.
23:08Within six months, it will start to get better.
23:10In two years, it should mostly be gone.
23:12But let me get on to the most important thing
23:14you need to do when it comes to credit.
23:17It's not your credit score.
23:19It's your credit file,
23:20also called your credit report.
23:21You should check your file at least annually
23:24and definitely before any major application
23:27you're going to make
23:28because if there's an error that stops you getting one,
23:30you've got too many applications on your file
23:31and you can start to go into a vicious circle.
23:33So, your credit file will list key information,
23:35the products you have,
23:36whether you've paid on time,
23:37any county court judgments against you,
23:39the electoral roll information.
23:40I want you to go through this line by line.
23:43Be a pedant.
23:45Be pedantic and I will give you a tick
23:47because even a small address error on an open account
23:53could block you in fraud scoring.
23:55Line by line.
23:57Now, for a general check,
23:59I would just do one agency.
24:00But if you're about to do a big application by that,
24:02I really mean a mortgage.
24:03I would check all three agencies
24:05because you don't know which one they're using.
24:06And one, if there is an error,
24:07they will pass it on to the others.
24:08It's safer to do it that way.
24:10You can see your files for free.
24:11You can use the statutory credit reports,
24:13which tend to be a bit slower
24:14or these ways are a bit quicker.
24:15For Equifax, Equifax Basic or ClearScore
24:18will give you a free report.
24:19For Experian, go to the free Experian app.
24:21Relatively new that.
24:23For TransUnion, loads of bank websites
24:24and many credit help apps
24:27will also give you a TransUnion report.
24:29Big warning though,
24:30loads of them will transign you up to this.
24:32£15 a month credit monitoring service.
24:34Everything you need.
24:35You don't need that to see your credit report
24:37and it's your credit report that really matters.
24:39So don't accidentally sign up for that
24:40if you don't need to.
24:41Final thought,
24:42we've been talking about student loans already.
24:44Student loan company loans
24:45do not go on your credit file.
24:48That isn't to say
24:49they can't affect your applications,
24:52but they don't affect it as debt.
24:54What they effectively do
24:55is they reduce your disposable income
24:57if you're paying off,
24:58if you're above that threshold
24:59and you're paying off the 9%.
25:00So it's a bit like you earn less.
25:02And that can still lead to rejections
25:04or getting worse products,
25:05but it's not because it's a debt on your credit file,
25:07it's just because you have lower disposable income,
25:10if that makes sense.
25:10Absolutely.
25:11We've got a virtual wall this evening.
25:13Jane is here.
25:14Jane, you've got a question for Martin.
25:15Good evening, Jane.
25:17Yeah, hi, Martin.
25:19Right, my question is,
25:20he used to have a good credit rating of about 750.
25:25After we manually underpaid by 55p,
25:30one bank loan instalment,
25:33the bank then incorrectly reported
25:35to the credit reference agency
25:38that we had missed six hold payments.
25:41Didn't find this out until earlier on this year
25:44when I had to check his credit file for something.
25:47We contacted the bank.
25:49The bank admitted they've made an error.
25:51They've corrected the file now,
25:53but it's not really improved his credit score.
25:55It's gone from 277,
25:57which is what it dropped to now, to 377.
26:00And you are absolutely sure
26:02that they have corrected it on the credit file,
26:05that that information is right,
26:06and it's the same credit file
26:07that is of the report that you're looking at?
26:10Yeah.
26:11Well, that's a tough one.
26:12Luckily, I've got John here.
26:13John.
26:14That is a tough one.
26:15So, yeah, my first instinct would be to say,
26:18check all credit reports
26:20with the three credit reference agencies,
26:22make sure it's correct.
26:23It sounds a bit like they maybe haven't updated
26:26the credit reference agencies
26:28with the right information,
26:29but if that's the case,
26:31if it is correct,
26:32there might be other factors
26:33that are influencing the credit score.
26:35So go through your credit report,
26:37have a look, see if there's something else.
26:38How recently was this?
26:39How recent was it?
26:40Right, so we found out in September,
26:44contacted the bank,
26:46the bank admitted their mistake.
26:47I think this could literally,
26:49sorry, they're telling me to go to break.
26:50I think this could literally be
26:52that they've just not updated it in time.
26:54Keep monitoring over the next month to six weeks.
26:57If it hasn't worked,
26:57you apply to have a notification on your file,
27:00a notice of correction put on your file
27:03where you write that this was a mistake
27:04and hasn't really happened.
27:06You write back to the bank
27:06and you put in a dispute
27:07with the credit reference agency
27:09that something is going wrong
27:10and you want it fixed.
27:12And you absolutely have a right to do that.
27:13But I suspect some just don't update that quickly
27:16and it's probably just an updating issue
27:17and it will fix itself.
27:18It should fix itself, shouldn't it?
27:19Yeah, they update every month.
27:21Go to break, go to break, go to break.
27:22Thank you very much.
27:25OK.
27:25Well, coming up,
27:26we're going to be talking about
27:27what actually happens
27:28when you apply for Credit Plus.
27:30Martin, you're taking us to your credit pub.
27:33My credit pub indeed.
27:34You will find out more.
27:35I'll have some water.
27:35OK, we'll see you after this.
27:49Welcome back to our credit scoring special.
27:51We've got this question
27:52that's coming from Eleni
27:53just for you, Martin.
27:54I have a clear score,
27:56credit score of 1,000,
27:57but I can't get a 0% balance transfer card
28:00to help me clear my credit card debts.
28:02I keep getting refused.
28:04Why could this be?
28:05Well, I'm hoping you've started to work out why.
28:07Let's go straight back
28:08into the big briefing now.
28:10Well, there you go.
28:11I'd written it there.
28:11What happens when you apply?
28:13You can still be rejected,
28:15Eleni, with a perfect credit score.
28:17Firms use information from your credit file,
28:18but they also use information
28:20from your application form,
28:21including that all-important income
28:23and any past dealings they've had with you.
28:25So if it's a bank
28:26that maybe you've had good dealings with,
28:28it might be more helpful.
28:29If it's a bank you've not had good dealings with,
28:31it might be more likely to reject than others.
28:33But remember,
28:35lenders' affordability score 2,
28:38which is just as important.
28:40Let me delve into that
28:41into a little bit more detail with you now.
28:44Here we go.
28:45So this is just to give you an example
28:47of the type of things that's going on.
28:48I'm not going to labour it too much
28:50because every lender will work slightly differently.
28:51Here's some of the type of things they will look at.
28:53Remember, it involves your income.
28:55You'll see how much of this does.
28:56First, your debt ratio.
28:57How much unsecured debt,
28:59loans, credit cards, overdrafts,
29:01not mortgages, not student loans,
29:03do you have as a percentage of your annual income?
29:05You've got £20,000 on credit cards.
29:07You earn £40,000.
29:09That's 50% and it uses this scale.
29:12There you go.
29:13That's OK.
29:13It's not good.
29:14It's a bit of a problem.
29:16What do you do?
29:16Well, try and reduce your debt
29:18or, of course, try and improve your income,
29:19which may be a bit more difficult.
29:20The next one, credit utilisation.
29:23This is the amount of the available credit
29:25you have that you are using.
29:27It works on the same scale as the other.
29:29So £100 debt on a credit card
29:31with a £1,000 credit limit
29:32is 10% credit utilisation.
29:34But it's looking across all of your debts.
29:36Now, the really important thing here
29:38is when this is used,
29:40it only really matters
29:41if you have a high debt ratio.
29:43If you've got a lot of debt, this matters.
29:45If you've only got a tiny bit of debt,
29:46the fact you're using all of it
29:47isn't that relevant
29:47if it's only a small proportion of your income.
29:49Again, you try and reduce your card or overdraft jet
29:52or mathematically, you try and get more credit.
29:55But that causes you problems
29:56in other forms of credit scoring,
29:57so I probably wouldn't bother with that.
29:58It's the second thing they look at.
30:00And the third is your disposable income.
30:03The spare cash each month after bills and essentials.
30:06Now, with cards, loans and mortgages,
30:08actually, they're mostly doing a statistical estimate.
30:11They look at what your main outgoings are,
30:13but for your spending,
30:14they're not really looking at your spending.
30:16They're looking at what somebody in your position
30:18would statistically be likely to spend,
30:19so you can't impact it that much.
30:21But it's still worth, before a mortgage application,
30:23just being careful and going frugal.
30:25So you're starting to see how much more complicated
30:27than the pure credit score this is.
30:29And we get more.
30:30For credit card acceptance,
30:32because your acceptance tends to be on your credit score.
30:35Will I get accepted or not?
30:37The affordability score dictates your credit limit.
30:39How much will you be able to borrow on the card?
30:41Because it's a variable credit limit.
30:43Acceptance is binary, this is variable.
30:45With a loan, it's more weighted to affordability score.
30:48This is why, think about this,
30:50this really explains everything.
30:52You are one person.
30:53You apply to one lender.
30:55They accept you for a £3,000 loan.
30:57They reject you for a £10,000 loan.
31:00You've got the same credit score.
31:01Everything else is the same.
31:02It's not about your credit score.
31:04It's about your affordability score.
31:06Mortgage acceptance, again,
31:07more weighted towards affordability scoring.
31:11Now, one of the things going on there
31:12is probably over-application.
31:15You've applied too many times,
31:16and that can be dangerous.
31:18Applying can mark your credit file,
31:19even if you don't get accepted.
31:21So if possible, don't apply.
31:23Go on to an eligibility comparison
31:26on a comparison site.
31:28That avoids hard searches,
31:30and it shows you your likely odds of acceptance
31:32for different cards.
31:33Then you can home in on the best card.
31:35Crucially, these use soft searches.
31:37So you see these searches on your file,
31:40lenders can't factor them in,
31:41so they're safe to do.
31:42I suspect you've been over-applying.
31:44Go and do an eligibility calculator.
31:46If your score's low,
31:47give it six weeks or so,
31:48and then try again,
31:50or even three months,
31:51and then things may have softened.
31:52Anything else?
31:53Are we good?
31:53Exactly right.
31:54Take a break from applying for about three months,
31:56and then use the eligibility check.
31:58OK, there we go.
31:58We both agree.
31:59Cool.
31:59OK, there's this that's coming as well from Stephen.
32:02He's asking,
32:03I've got an excellent credit score,
32:05but I want to change
32:06to an interest-free, balanced transfer card.
32:08Will my credit score go down?
32:10Who cares?
32:11Stephen, I genuinely don't care.
32:14For a very simple reason.
32:15First of all, it's only your credit score.
32:16It's only an illustration.
32:17But more importantly,
32:19I tend to think of managing your credit worthiness
32:21like saving.
32:22I'm saving up for a rainy day in case I need it.
32:25What is the most important use of your credit score?
32:27To cut the cost of existing debt,
32:29which is what a balanced transfer is.
32:31So use it.
32:33It is far better to have a lower credit score
32:35and better finances and cheaper debt
32:37than a good credit score,
32:38and you're paying over the odds.
32:39That's what you're building your credit score for.
32:41If your credit score goes down, it goes down.
32:43You've got a card that cuts the cost of your debts.
32:45Hurrah!
32:46Yes, Stephen.
32:49Sorry, Mayim.
32:50Right, this is coming from Ahmed.
32:52I think quite an important question.
32:53What's the safest checklist to build a strong credit history
32:56from a team?
32:57Can I have me pub?
32:59Bring me me pub.
33:02It's the borrower's return, everybody.
33:06Is it Anne?
33:08Anne volunteered in the break
33:09that she's going to come and sit in my pub.
33:11Come up the stairs, my love.
33:12There we go.
33:12Just wait until we don't need to get hurt.
33:14If you go and sit over there.
33:18This is a prop.
33:19Do not drink it.
33:19It might poison you.
33:20OK, so this...
33:23I just want so people understand how this works.
33:25We're going to play a game.
33:26You're in a pub.
33:27This is what happens.
33:29You're sitting there.
33:30Ooh!
33:31Anne, how are you?
33:33Oh, it's lovely to see you.
33:35I forgot my wallet.
33:36Oh, I'm so sorry.
33:38Could you lend me 20 quid,
33:40and I'll buy you...
33:41Give it you back tomorrow,
33:42and I'll buy you a pint as well.
33:43Now, I have done this about 40 times before,
33:48and every single time I have done it,
33:51I have always paid back the next day,
33:53and I have always bought a pint on top.
33:55Would you lend me 20 quid?
33:57Because it's you, Martin, I would.
33:59No, but even if it wasn't me...
34:00No, probably not.
34:02Oh, well...
34:03I'm a fan.
34:06It's always...
34:07Yes, I would.
34:10I'm very glad you said that.
34:12Next example.
34:13Here we go.
34:15Anne, how are you?
34:17Oh, great, thank you.
34:19Oh, no, I forgot my wallet.
34:20Tell you what, could you lend me 20 quid,
34:22and I'll give it you back tomorrow,
34:23and I'll buy you a pint as well.
34:25Now, this person has done this 30 times before,
34:29always forgets to pay back the next day,
34:31never buys the pint on top,
34:32and always has to be chaste to give the money.
34:34Would you lend it to them?
34:37If their name was Martin Lewis, yes,
34:39but no one otherwise.
34:41No one else, so you're not giving it?
34:42Good.
34:43No.
34:43Final one.
34:46She's hard work.
34:48Simple example.
34:53Hi.
34:54Hi.
34:55Nice to meet you.
34:57Oh, no, I forgot my wallet.
34:58Would you lend me 20 quid,
34:59and I'll buy you a pint tomorrow?
35:01You have never met this person before in your life.
35:05You do not know who they are.
35:06It's not Martin Lewis.
35:08Would you lend to them?
35:10No.
35:11No.
35:11OK.
35:12This is credit scoring.
35:13First example has a good credit history.
35:15We know that they're repaid.
35:16We can predict their future behaviour based on their past.
35:18They're a pretty safe bet.
35:19Second person, we predict their future behaviour based on their past.
35:22They're not a safe bet.
35:23Third person may be lovely,
35:25but you don't know them.
35:26You have no data.
35:27No data gets rejection.
35:29That's how credit scoring works.
35:30And if you'd like to go back there before they move the putter away,
35:32thank you very much for that, everybody.
35:34I know we're on the wrong channel.
35:37Get my pub out of here.
35:41OK.
35:42Thanks, chaps.
35:42Well, they do that.
35:43Two biggest reasons people are rejected.
35:46Your past behaviour and they don't have enough data.
35:49How do you build data?
35:50You need credit to get credit,
35:52but how do you get credit when you don't have it?
35:57You get what's called a build or a rebuild credit card.
35:59Easy to get.
36:00They have high interest.
36:01Go on to an eligibility calculator for a rebuild card.
36:04If you can get them,
36:05there are a couple that give spending rewards.
36:06Tesco Foundation card, Asda money, terrible interest rates.
36:09Here's how you use them at no cost.
36:12Spend 50 to 100 quid a month on them.
36:13Just your normal spending.
36:14Don't spend anything that you wouldn't spend.
36:16Pay it off.
36:17In full.
36:18In full.
36:19Preferably by direct debit.
36:20Never miss repayments.
36:21Never withdraw cash.
36:22That's always bad.
36:23Never bust your credit limit.
36:24After a year or so with no other issues,
36:27your credit worthiness should improve.
36:29My problem with an 18-year-old,
36:30only do it with an 18-year-old who's trusted
36:32and will do this sensibly and not realise it's just free money.
36:36Just know it's a way to build their credit score.
36:38You could even do it with two cards
36:40and don't use credit re-builder schemes.
36:41Can you tell again they're going,
36:43go to break, go to break?
36:44But hopefully that makes sense.
36:46Get yourself a credit re-builder card,
36:48but use it carefully.
36:49Never overspend.
36:50Pay it off in full.
36:51Absolutely.
36:51Thank you very much, Martin.
36:53Now, coming up next,
36:5410 ways to be financially fit
36:56and the rest of news you can use,
36:57including half-price Christmas trees.
36:59Well, welcome back to the show.
37:12They are loving this credit score special.
37:16But, Martin, what I want to know,
37:17how do you actually boost your credit worthiness?
37:19That's what we want to know.
37:21Well, the honest truth about this is,
37:23I don't know if I can use this phrase,
37:24but it's what we called it when I was growing up.
37:26It's a bit like going on the pool, financially.
37:29You all right, Anne?
37:32So, the truth about going on the pool
37:34is there's lots you can do to make yourself look better,
37:37but different people are attracted to different things,
37:38so there's no perfect solution.
37:40But what I've got here is 10 tips
37:43to make you financially fitter and more fanciable.
37:50Here we are.
37:51So, the first one,
37:52use consistent answers on every application.
37:56Now, what do I mean by that?
37:57First of all, they like stability,
37:58but more importantly, if you get it wrong,
37:59you can be triggered out of fraud scoring.
38:01So, if you could be a marketing assistant
38:04or a promotions assistant,
38:06don't vary the term.
38:07Use the same term every time.
38:08If you've got more than one mobile,
38:10use the same mobile on every application.
38:12Of course, if your job changes,
38:13then you change what you put in,
38:14but stability is important.
38:16Next, get on the electoral roll if you want.
38:18It's a big problem for credit scoring if you're not.
38:20You can still opt out of the open register.
38:22That's the thing that stops you getting junk mail.
38:24Opt out of the open register to not get junk mail.
38:26For a national, then you can ask for a notice of correction
38:30and that can prove your residency and help.
38:32Yes?
38:32Yes.
38:32Yes.
38:33Right.
38:34Finally, you can snog or marry who you like.
38:36You have my permission.
38:38Financially.
38:38That will not affect your credit.
38:41What will a joint product's mortgage, loan, bank accounts?
38:46No such thing as a joint credit card.
38:47It's a second card holder.
38:48If you even apply, not have, but you apply for a joint product,
38:52that can financially link you.
38:54That means they can look at the other person's file
38:57when you're applying for credit.
39:00So, if they've got a bad credit history,
39:01this could kibosh your applications.
39:03Be very, very careful before getting joint products.
39:06By the way, if you were jointly, had joint products with someone
39:09and you're no longer financially linked to them,
39:11then you apply for a notice of disassociation
39:14to all the credit reference agencies,
39:16but you have to be generally financially separate.
39:19Next one.
39:19Fascinating, this one.
39:20The first time I've said this.
39:22Overpaying your mortgage may start to boost your credit worthiness.
39:25Check you shouldn't be saving.
39:26Go to a mortgage overpayment calculator to check.
39:28This is because Experian, the biggest reference for Reddits Agency,
39:32is adding it in its credit score,
39:33and they advise companies on how they should do their own credit scoring,
39:36so we're likely to see more of it coming in the future,
39:39overpaying your mortgage.
39:41Carrying on, let's get to more.
39:43Never miss or be late on repayments.
39:44That is so important.
39:46If you're not good, but you want to pay variable amounts,
39:49well, at least set up a direct debit to pay the minimum each month
39:52and you can manually overpay on top,
39:54but at least that way you will never miss a repayment.
39:56Buy now, pay later is increasingly appearing on credit reports.
40:01Klarna and Zilch already report.
40:03The rest are likely to start doing so
40:05once regulation starts in the middle of next year.
40:07It might not feel like a debt, but buy now, pay later is a debt.
40:13So, if you pay it off on time, it can be positive.
40:17If you miss payments, it can be negative for your credit file.
40:20Not for credit files, it doesn't go on your credit score,
40:22but it can be negative for lenders, can see it negatively.
40:25An overuse of it could be a danger sign, so think of it as a debt.
40:29Don't withdraw cash on credit cards, always a bad thing to do.
40:32It's expensive and if you do it a lot,
40:33it can be seen as poor money management.
40:35I know some of you are saying, but I do it abroad.
40:37If you're doing it one-off abroad
40:38because you've got a specialist overseas card, that's not so bad.
40:41It'll disappear off your file in a few months, the score lower.
40:43But be careful with that one.
40:45Time application's right.
40:47I talked earlier about the impact on your credit score,
40:49but actually, some things only last on your credit file for a set time.
40:53The bad stuff, CCJs, defaults, finished bankruptcy, stay for six years.
40:57Applications only for one year.
40:59So, if something's just about to lapse,
41:01wait a week till it's gone before you do your application.
41:03Makes sense, doesn't it?
41:05Now, one I'm asked about all the time.
41:06Now, logically, if I pay £1,500 a month in rent,
41:12that should be a good indication that I can afford to pay £1,500 of mortgage,
41:16shouldn't it?
41:17It should.
41:19It doesn't work like that.
41:20It should.
41:21But it's starting to be changed.
41:22There are ways you can apply to have paying rent on time
41:26factored into your credit score,
41:28which could, of course, improve your mortgage acceptability in future.
41:33So, if you're a tenant, you can sign up to Canopy,
41:37which reports to the Experian credit file for free.
41:40You could sign up to Credit Ladder,
41:42which will report to one agency for free.
41:44So, using those two in conjunction,
41:45you can get two of the three agencies.
41:47If you want all three of the agencies,
41:49you can pay Credit Ladder £60 a year,
41:52and you'll get it to report to all three of the credit reference agencies.
41:56Clearly great if you pay your rent on time.
41:59Clearly not good for you if you miss or are late paying rents.
42:02Makes sense.
42:03Also worth noting, some big landlords,
42:07social housing landlords with over 500 properties,
42:10have the Experian Rental Exchange Initiative.
42:13They should have told you about it.
42:14That means they're reporting to credit files,
42:15but you could choose to opt out, for example, if you wanted.
42:18If you're paying rent on time, I wouldn't.
42:19And my final one,
42:22don't do little applications before a big one.
42:24If you want a credit reward card,
42:26but you're about to apply for a mortgage,
42:29do it after the mortgage application.
42:31The mortgage application is what matters.
42:33Applications do impact your credit worthiness,
42:36so put things in the right order when you're applying.
42:39And those together is how to be financially fitter and more fanciable.
42:44How are you doing?
42:48OK, you have got time for some quick news you can use.
42:51Okey-doke.
42:52Right, time for some quickies.
42:58First of all, state-owned bank or financial institution,
43:01NS&I has boosted its British savings bond rates.
43:03You can see them there.
43:04They're all over 4%.
43:05Now, these are just fixed-rate savings by another name.
43:07Let's not get overcomplicated.
43:09The rate is good.
43:11It's not top.
43:12It's about 0.2 percentage points or 0.3 percentage points
43:15behind the very top open market fixed-rate payer.
43:19But many people want a big name with their savings.
43:21NS&I is as big as it gets.
43:24And crucially, most savings are protected up to £85,000 per person
43:28per financial institution by the state.
43:30This is owned by the state,
43:31so every penny in there, even if it's more than that, is protected.
43:35So it's a good option for those with very large amounts.
43:38Maybe you sold your house seven months ago
43:40and you want to know what to do with the money.
43:41Next, a heads-up.
43:42You can get £10 to £60 West End theatre tickets
43:45if you've got a MasterCard.
43:47Starts next Tuesday, 10am.
43:49I'm doing it now because Sun shows sell out quickly,
43:51so you want to be on at the exact moment.
43:53It's the official London Theatre New Year sale.
43:55First dibs for those people who got a MasterCard
43:58on 2026 performances,
43:59including Wicked, The Devil's Wears Prada,
44:02Back to the Future, The Producers,
44:03and six...
44:05That was just for my daughter, by the way.
44:08If you're watching, I love you.
44:10From tomorrow, Ryanair won't accept home-printed boarding passes.
44:13You must check in online or Varics app first.
44:15If not, you'll be charged up to £55.
44:17But if you have checked in online
44:19and your phone ran out of battery,
44:21they're no longer going to charge the £20
44:23for printing a boarding pass at the airport.
44:24You can now do that for free.
44:25So in some ways, it's a win for some people.
44:27And then from Thursday,
44:28you can get 50% off
44:30three Christmas trees at Tesco.
44:33The club card holds us only in-store.
44:35There's a six-foot Nordman fur.
44:37These are all real trees.
44:38£20, so half 40 down to 20.
44:40Three-and-a-half-foot potted tree for £15,
44:42or a four-foot tree with lights for £20.
44:44And while we're speaking about Christmas,
44:46next Tuesday is the big one.
44:50We do it every year.
44:51Big audience, festive forecast,
44:53the Black Friday special, Christmas deals.
44:55It's all coming in.
44:57I'm even going to have to sing at the start of the show
44:59because that has sadly become a tradition too.
45:02It's all going on, so do not miss it.
45:04Set your diary, 8 o'clock next Tuesday,
45:06and have a pen and pencil or some note-taking with you
45:08because at the end, I'm running through all those deals
45:10and I'm going to be running through them at serious speed, Jeanette.
45:13Well, there you go.
45:16I've got one question for you.
45:18How is your voice doing?
45:19My voice is all right now, but you know I can't speak out
45:21when I've done the festive forecast that we'll go through next week.
45:23Ladies and gentlemen, thank you so much.
45:25You've got questions about Christmas deals
45:27or free cash from bank switching or children's savings?
45:29I'll be covering them all next week.
45:30Use the hashtag Martin Lewis.
45:31Any questions on what we've done today, get in touch with that as well.
45:34Jeanette, you've been wonderful.
45:35The audience here has been wonderful.
45:36A round of applause for John Webb and Anne.
45:38And you know what?
45:44If I drank, I'd say I'd be off to my pub now,
45:46but I don't really, so I just can't pretend afterwards anyway.
45:49That's it. Take care, everybody.
45:50Good night.
45:51CHEERING AND APPLAUSE
46:08MUSIC CONTINUES
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