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The Martin Lewis Money Show Season 17 Episode 2
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00:00The UK's biggest credit reference agency, Experian, is about to tell millions of its customers their credit scores will drop.
00:22If that's you, what does it mean in practice? Credit scoring is shrouded by grey mist.
00:28Tonight, I want to blow them away.
00:31I want to show you the truth of how it really works, what you need to do, and I will finish with my crucial key tips to boost your acceptance odds.
00:41Now this isn't just about the obvious mortgages and credit cards and loans, where credit scoring can even impact the rate you get.
00:49Credit checks may affect things you pay ahead for too, like mobile phone contracts and sometimes energy direct debit tariffs.
00:59Then, in my news you can use, new figures out show 1.1 million graduates have paid more student loan back than they should have done in just the last tax year.
01:10I will show you how to reclaim hundreds or thousands of pounds of it.
01:15And British savings bonds are about to get better, half-priced Christmas trees, a Ryanair warning and cheap theatre tickets.
01:21Now to our own showstopper, Jeanette Kwachi, everybody.
01:25Thank you very much.
01:28I am your leading lady.
01:29I am happy to be back, but we want to hear from you.
01:31So please do send us your questions on X or on threads.
01:34Use the hashtag martinlewis.
01:36Or you can email the team martinlewis at ITV.com.
01:39If we don't use your question tonight, we may use it in a future show.
01:43And a huge welcome, as always, to our studio audience.
01:46Wave your wallet, everybody.
01:48We love that.
01:49You're amazing.
01:50That's right.
01:51So, Martin, we had an enormous response to your call-out last week, saying that people could leave O2 because it's hiking its price hike, if you like.
01:58Just wanted to show you a few messages.
02:00This is coming from Nicola.
02:01She's ditched and she's switched.
02:03She says, I saw your O2 increase information this week, requested my PAC code and switched to a new provider.
02:09I got a great offer for three months, pocketed a saving of £38, £25 a month, £459 a year.
02:16Wow.
02:17New sim, up and running, O2 boycott.
02:19So, if you watched last week, you know I got on my soapbox about this.
02:23O2 put up the price hike it had previously said when people signed up it would give them.
02:27So, it was a price hike on the price hike mid-contract.
02:30Crucially, if you get that notification, you've got 30 days in which you can leave.
02:35And then you might be able to go and save a lot of money.
02:37And 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.
02:44And other companies think, we don't want to do that either.
02:47Yeah. Sean, he's taking your advice here.
02:49And Sean has haggled.
02:50He 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.
02:58A huge saving of £408 a year.
03:03Great.
03:04Now, 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.
03:14But 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.
03:23So I asked people to try.
03:24Sean is a success.
03:25And 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.
03:31And they've got better deals.
03:32So that's working.
03:33Fabulous.
03:34Right.
03:35Now, there is a question though.
03:36It's coming from Shirley.
03:37It's a follow-up question.
03:38She said, I've seen your item on O2.
03:39I just asked for a PAC code and they've come back saying I need to pay the device off in full.
03:44Is that correct?
03:45It's very interesting.
03:47So a PAC code is a porting authorisation code that you get when you're changing mobile phone number.
03:51Listen, I've seen some of those messages and what it actually says is it does say you need to pay this off in full.
03:57But I think that is a terrible piece of phrasing by O2.
04:01I'm going to hope it's accidental and not deliberate.
04:04Certainly something the regulator should look at.
04:06What that means is you're still going to have to pay your handset.
04:09It doesn't mean you have to pay all of your handset now.
04:12You were paying it by the month and you can continue to pay it by the month, but you'll have to pay everything that they owe them on the same plan.
04:18But when they say pay it off in full, it sounds like you have to give them the money now, doesn't it?
04:22It's poor communication, bad phrasing.
04:24I hope it hasn't deliberately been done to put people off switching.
04:27If it has, that's something the regulator should look at.
04:29You can leave O2's airtime plan and keep paying your handset costs by the month just as you were doing before.
04:35You're free to leave, Shirley.
04:37OK, hopefully that helps, Shirley.
04:38Now, I know we're going to get into credit scoring in this one later.
04:40We are.
04:41The meat of the show.
04:42Something I wanted to ask you first, though, is a question that's coming from Amy O.
04:46Oh, there it is.
04:47I've heard there's a way you can claim back a student loan which you may have overpaid on.
04:52How do I do this and how do I know if this applies to me?
04:55Absolutely.
04:56We've just got brand new figures out on this from the student loans company, so I'm going to do the first part of my news you can use now.
05:05OK, so the new figures say 1.1 million university leavers and graduates have overpaid their student loans in the 24-25 tax year.
05:14And that adds to at least 4 million people from figures and requests that we've given them for information in the past.
05:19So there could be 5 million of you out there who are owed money.
05:23There are four reasons, but the first reason is the big reason.
05:28It's when you repaid your loan but you didn't earn enough to need to repay it.
05:33Over a million people in the last tax year did this.
05:35Now, the rules state absolutely plainly, you only need to repay the student loan if you earn over the annual threshold in a tax year.
05:43What your annual threshold is depends which plan you're on.
05:46So we'll hold on this graphic so you can read your graphic as I go through.
05:50I'm going to focus on Plan 2 loans because that's the one with by far the most people on.
05:55England starters, it's when you started university and where you were resident, 2012 to 2022.
06:00And wealth starters from 2012 onwards.
06:03Your repayment threshold is £28,470 a year.
06:06You repay 9% of everything you earn over that in a year.
06:10That's how it works.
06:12But PAYE, payroll, it takes the money based on your monthly earnings.
06:19So, £28,470 a year is equivalent to £2,372 a month.
06:23You repay 9% of everything you earn above that a month.
06:26Let me give you an example and you'll see why so many have overpaid this.
06:30Here we go.
06:31So, there's the monthly repayment threshold.
06:34Let's imagine maybe you've just started after university and it's the next year or two.
06:38You've had a few months off.
06:39You didn't work in April.
06:40You didn't work in May.
06:41You didn't work in June.
06:43Then you got yourself a job paying £36,000 a year.
06:46£3,000 a month.
06:47Done.
06:48Because it's easy maths.
06:49In each of those months, you have to repay 9% of everything above the monthly threshold.
06:55Which is about a repayment of £56 a month each month for the remaining nine months.
07:01You understand why?
07:02OK.
07:03But, now look at this.
07:06Your total tax year earnings were £27,000.
07:11The annual threshold is £28,470.
07:15You earned less than the threshold.
07:19You don't have to repay your student loan.
07:21Here are the payments that you made.
07:23£508.
07:24You can reclaim the £508.
07:26So, this is big for many people.
07:29Who does it tend to most commonly affect?
07:31Well, it's those who only worked for part of the year.
07:35Those who are on commission or those who are on variable incomes.
07:38If your income is going up and down and you didn't earn over that amount in the tax work,
07:42you are able to reclaim.
07:44You use SLC Refund Request Form at gov.uk
07:47or you can do it in your student loan company repayment app.
07:50You can do it for every year except the current tax year
07:53because the current tax year, you'll have to wait till it finishes.
07:56So, for every year before that, you can go and reclaim your money.
07:58Yes, Jeanette?
07:59Just before you move on, we've got a success story on this one
08:02and it's a big one.
08:03Have a look at this.
08:05Danielle lives in Loughborough with her husband and two kids.
08:09Being a maths teacher was the career that I always wanted.
08:13I needed to take a student loan to pay for it.
08:15After my initial £16,000 I borrowed,
08:18I also had to borrow another £9,000 to pay for my teacher training.
08:22I've watched the Martin Lewis show for almost seven years now.
08:26There was one show back in November, Martin mentioned
08:29there's over a million students that have overpaid their student loan.
08:32Is that me? Have I overpaid?
08:34He gave numerous reasons.
08:35The one that stood out to me was gaps in employment.
08:38In the last few years, I have had to give up my job when I had my eldest child.
08:42He was born with a brain condition and requires a lot of care.
08:45Once Martin shared that you could possibly have overpaid your student loan,
08:49I acted instantly.
08:51It was as simple as log on to student finance,
08:54click manage your statements and click request refund.
08:58Within 48 hours of my application, I was told I got a refund of £2,213.
09:04It was a pinch-free moment.
09:06I was seven months pregnant.
09:07I'm not working.
09:08I don't get an income.
09:09Having that money was really helpful.
09:11I'm so glad I went through the process.
09:13Thank you so much for doing that film.
09:18So look, she said a million people have overpaid.
09:20That was the previous tax year.
09:22This is an annual figure and it's still a million people overpaying each year,
09:25which is why it's a clarion call for me that if you are a graduate
09:28or university leaver who's paying your student loan to cheque,
09:31you haven't overpaid.
09:32Now, just before I move on, because we came in, there is one thing.
09:36This is a technicality and people ask me about this.
09:38It's a bit complex.
09:39If you overpaid in some months but earned over the annual threshold,
09:43you cannot reclaim.
09:44So this is a negative.
09:45Let me explain that to you.
09:47So here's a scenario.
09:48Someone who earns £24,000 a year, normally standard salary,
09:52so £2,000 a month, below the threshold,
09:54will stick with Plan 2 again as an example here,
09:56but obviously from different plans, the numbers are different,
09:59but then got a £5,000 bonus in December.
10:02So they've got a £5,000 bonus.
10:04Let's have a look.
10:05First of all, their total tax year earnings are £29,000.
10:08Above the threshold, therefore.
10:11So they repaid 9% in this month of everything above £2,372.
10:18They repaid 400, just over £400.
10:22Now, what you might think is, hold on,
10:24they're only £500 above the annual threshold.
10:26They should be paying 9% of that, about £45.
10:29But no, it's done by the month.
10:31They've repaid £400 of their student loan,
10:34even though they're only just above the threshold.
10:37And this is complicated, but effectively the rule is this.
10:40You repay your student loan by the month through PAYE,
10:44and that is correct,
10:46unless your total annual earnings are below the threshold,
10:49and then you don't have to repay.
10:51If you think it seems unfair, that's because it's unfair,
10:54but that's the way the system works.
10:55Jeanette?
10:56Absolutely.
10:57I mean, I understood it, but you can move on.
11:00There's more.
11:01OK, good, you got it.
11:02Right, I've got more for you.
11:03Yes, you're right.
11:04Other reasons.
11:05Let's scroll up.
11:06There we go.
11:07I'll do these ones quickly.
11:08Reason to all much smaller, all in the tens of thousands,
11:10not over a million here.
11:11Wrong student loan repayment plan.
11:13If your employer doesn't know which plan you're on,
11:14it has to default to Plan 1, which is repayments above £26,000.
11:17But the biggest plan, Plan 2, and all the Scottish plans, Plan 4,
11:20the repayment threshold is higher.
11:22So you shouldn't be repaying as much.
11:24You should only be repaying above this amount,
11:25but you're repaying above that amount.
11:27If that's you, call the student loan company here for a refund.
11:30You can't do it online.
11:31Also, go and talk to your employer's payroll department and say,
11:34actually, this is my plan.
11:35Please change my setup so I'm paying on the right plan.
11:37Reason three.
11:38You started repaying the loan too early.
11:40Nearly £40,000 here.
11:42This is the rule.
11:43You only, regardless of what you earn,
11:45you only have to start qualifying to repay the student loan
11:48in the April after you leave university.
11:50For most graduates, that's nine months after they graduate,
11:53so you'd leave in July the following April.
11:55But if your employer has the wrong details,
11:57it can take the money too soon.
11:59If that happens, you can get the money back
12:01by calling SLC for a refund.
12:03Good to have your payslips if you're doing that one.
12:05And the final reason, often get asked about this,
12:08is money is deducted after you've fully cleared the loan.
12:11So once you've paid off everything that you owe.
12:13Nearly 60,000 people last year.
12:16The loan's normally wiped after 30 years.
12:18It depends on the plan.
12:19Every plan is different.
12:20So you can look that up online.
12:22But the student loan company takes time to notify PAYE,
12:25so they don't always stop it on time.
12:27If that happens, you don't need to reclaim.
12:29You will be paid back automatically.
12:30My top tip, though, within the last two years
12:33of repaying your student loan,
12:35you can go online at student loan company
12:38and ask to set up a direct debit.
12:40So you pay it by direct debit, not through the payroll,
12:42and then you only pay the exact amount that you owed.
12:45And that is where we're finishing, I think, on student loans.
12:48One more. I know.
12:50I'm so sorry. There's one more question.
12:52Oh, go on.
12:53It's coming from... I'm sorry.
12:54It's coming from Amy.
12:55Amy says,
12:56I recently received a student loan refund of £1,601 overpaid.
13:00A proportion of that will have paid off interest.
13:03When I claim the refund,
13:04won't the amount just be added to my student loan?
13:06Absolutely. Very important question.
13:08Yes, 100%.
13:10If you've overpaid and you get the money back,
13:12then your student loan account, you will owe more.
13:15Now, what you may be thinking is, hold on,
13:17doesn't he normally say it's best to overpay loans
13:19because then you pay less interest?
13:21The quicker you pay a loan, the better.
13:22You are right on normal loans.
13:24Student loans are not normal loans.
13:27For example, those on those Plan 2 loans,
13:30the biggest one being repaid off at the moment,
13:33the stats show only around one in three people
13:36will clear what they borrowed plus interest
13:39in the 30 years before it wipes.
13:41Most people will just pay 9% of what they earn
13:44above the threshold for 30 years.
13:46So if you've overpaid and you take the money
13:49and you're one of those two thirds of people,
13:52lower to middle earners,
13:54well, you're still going to repay 9% of everything
13:56you earn over the threshold for the next 30 years.
13:58So taking that money back is not going to cost you any more in future.
14:00The money in your pocket is better in your pocket.
14:02Now, with other plans, you are more likely to clear earlier
14:05because the loan amount is lower and the interest rate is lower.
14:08But what I would still say then is if you need the money,
14:12say, to clear expensive debts or to reduce your mortgage borrowing,
14:15on the other plans, the interest rate is only 3.2%
14:18and student loans have better terms than any other form of borrowing.
14:21You only repair it if you're earning enough
14:23and it's going to wipe at some point.
14:24So in that case, you may still be better to take the money,
14:28have it in your pocket so you can use it
14:30so you don't have other more expensive debts.
14:32But especially those on the Plan 2 loans,
14:34the majority of people are better to take the money
14:36rather than just to reduce a loan
14:38that won't necessarily mean they pay any less in the future anyway.
14:40OK, now...
14:41Do you understand that? Because it's really complex.
14:43Yeah. OK, I promise you're done now with that, I promise.
14:46Well, you can get in touch.
14:47Let us know about your student loan situation.
14:49Does this affect you?
14:51Always use that hashtag, Martin Lewis.
14:52But coming next, credit scoring.
14:54How does it work?
14:55And what is Experian about to do?
14:57We'll see you in four.
15:10Welcome back. We're live.
15:11We're going to be talking about credit scoring in a moment.
15:13But just before that, we're getting lots of reports
15:15that the student loan company website and app is struggling a bit,
15:18likely because of lots of demand.
15:19It's always what we do on this show.
15:21So be a bit patient, maybe check it in half an hour or an hour or so,
15:24and it should be easier.
15:25It should be. There's lots coming in over the break.
15:27I'm going to sort it all out and come back to it.
15:29But let's go to Jo in the studio.
15:30Jo, you've got a question for Martin.
15:32Hi, Martin.
15:33Hi.
15:34Yeah, I've heard that the credit agencies are changing the rules,
15:37but I don't understand how they actually work in the first place.
15:40Could you explain?
15:42I can.
15:43And they're not changing the rules, they're changing the score.
15:45Ah.
15:46And the first thing you all need to understand is the difference
15:48between your credit score and the credit scoring process.
15:52Don't worry.
15:53I'm going to explain in my big briefing.
15:58OK.
15:59The truth about credit scoring.
16:00The most important thing you all need to understand.
16:03You do not have a credit rating.
16:06You do not have a credit score in the UK.
16:09There is no single number that dictates acceptability.
16:14Each lender, when you apply, scores you differently
16:18based on its own individual profitability wish list.
16:23Profitability, not risk.
16:24Why do I say profitability?
16:26Well, in many cases it is.
16:27Are you a good or bad risk?
16:29But it may be a company that's trying to target people
16:31who are a poor risk so it can charge them more.
16:33And for them, poor risk are profitable customers.
16:35So it's a profitability wish list, not a risk wish list.
16:39That's the problem.
16:40Nope.
16:41Yeah.
16:42I was expecting that, because this is what everyone says to me.
16:46But that's nonsense, Martin, because I have paid for my credit score.
16:48I know what my credit score is.
16:49I monitor my credit score very carefully, and I do have a credit score.
16:54Is that what you were thinking?
16:55Yes.
16:56OK.
16:57Let me explain.
16:58Here you go.
16:59The big credit reference agencies, there are three of them,
17:02they will show you a credit score, capitalised,
17:05because that is your credit score, not the credit scoring process.
17:08But they are just their illustration of how a typical lender may view you.
17:16They are not used by lenders.
17:19Now, just to prove my point, TransUnion is out of 710.
17:23Equifax is out of 1,000.
17:25Experian is out of 999.
17:28But that's about to change, so it's out of 1,250.
17:31The fact they're all different tells you something.
17:33Just before I go on, let's explore that Experian change for a moment.
17:36Here's what's happening.
17:38It's rolling out new scores from mid-November till the end of the year.
17:40Some of you will have had notifications today on this particular one.
17:4344% of you will see your band drop.
17:46It might drop from excellent to very good.
17:4842% will get a higher score.
17:50Some may be in a higher band.
17:52But crucially, this shouldn't change anything.
17:55Why?
17:56Because this is just their illustration of how a typical lender views you.
18:01The underlying data is what the lenders use.
18:05Your underlying data hasn't changed.
18:08Therefore, your acceptance by lenders won't change.
18:12We are too hung up on this.
18:14Now, we have a man from Experian here, John Webb.
18:17Thank you for joining us.
18:18John, why are you doing this?
18:20So, what we've done is, as you've explained there,
18:22lenders are looking at the data on credit reports.
18:24We've added in more data into our credit score.
18:27Things like overpaying a mortgage, reducing your overdraft,
18:33taking cash from a credit card.
18:34These are the things that lenders are now looking at.
18:37We've included them into credit scores so we can give people the most accurate view
18:41of how a lender will view their credit report information when they apply.
18:45How a typical lender does it differently.
18:47Why 1250, though?
18:49Why have you increased the number?
18:50I don't get that.
18:51I've heard your explanations.
18:52I still don't get it.
18:53So, we did consider staying at the same score.
18:56But, actually, the number one thing people tell us is that they want more information
19:00about how their credit score is calculated.
19:03By moving to the new range of up to 1250, it allows us to give people more detail
19:08than they've ever seen before about how their score is calculated
19:11and, more importantly, how to improve it.
19:13Because, typically, higher credit scores mean access to more affordable credit.
19:17Better rates, better limits.
19:18You're obviously a cleverer man than me because I can't see how doing it out of 999,
19:21creating it to an arbitrary figure of 1250 when you could just proportion it
19:24makes any difference.
19:25But, hey, we'll move on.
19:26So, let me move on a little bit.
19:28Here we go.
19:29The biggest single thing you need to understand about credit scoring
19:32is the biggest piece of information they miss.
19:34The biggest thing that lenders look at is on your application form.
19:37It's your income.
19:39Lenders also do affordability scoring.
19:42That isn't in your credit score.
19:43Think about it.
19:44You've got the best credit score in the world.
19:45It's been brilliant.
19:46You've just lost your job.
19:47You've got no income.
19:48You can't afford to repay what you want to borrow.
19:51They are not going to lend to you.
19:52Credit scoring is not the end of the story at all.
19:55So, my big message to you.
19:57You know, people get in touch with me and say,
19:58my credit score has just moved by seven points.
20:00What should I do?
20:01Don't sweat small moves in your credit score.
20:04It's just their illustration.
20:06But do sweat big ones that last longer because that's likely an indication
20:11there's something more systemic going wrong in your file.
20:14Kevin has emailed you just on this.
20:17Have a look at this.
20:18My energy supply did a hard search on my credit report, but I decided to switch
20:22instead of after getting a better deal within the cooling off period.
20:26Does this affect my credit score?
20:28Seems to have dropped a little.
20:29And what can I do?
20:30Well, yeah, it does affect your credit score, but who cares?
20:33Would be my honest answer.
20:34I've got more detail on that, though, because this is what you need to consider.
20:37So, we'll just break it down.
20:39What you've got there is a new credit account or an application
20:42or maybe a cash withdrawal on a credit card.
20:45What happens then?
20:46You'll get a small score dip, but it'll only last for up to about three months.
20:50And then it'll go back to normal.
20:51It bounced back.
20:52Don't worry.
20:53I mean, listen, it always depends on circumstance, but this is sort of guidance.
20:56Scale of magnitude.
20:58If you've been applying for lots of accounts in a short space of time,
21:01that is a more significant problem.
21:03You'll see a bigger drop in your score.
21:05It'll probably start reducing after three months and then it should be gone after six months
21:09as long as you don't do any more.
21:11If you've missed the payment, we're starting to get onto this side now is the real problem side.
21:16You'll have a much bigger drop.
21:17It'll often go on for six months after it has been fixed.
21:21So, you have to make sure you make the payment and it's only improved if you're paying on time afterwards
21:25or it could be even worse.
21:27Now, if you have an arrear where you are owing money to a lender,
21:31that is significantly damaging.
21:32It can take two years to recover from and only if you manage to make it up to then.
21:36And then the really bad stuff, the stuff that is going to cause you problems with all lenders,
21:41if you have a default, a county court judgment and insolvency.
21:45Bankruptcy. IVA equivalent.
21:48It is very significantly damaging.
21:50It can impact your score for up to six years or possibly longer.
21:53Now, I'm talking here about the credit score that the credit reference agencies give you,
21:57but that is roughly symbolic of the way that most lenders would think too.
22:01So, it's both the impact and the time span of the impact that matters.
22:04In the case of that question, they've gone in a few months.
22:07OK. How about this one from Sandra?
22:09She's asking, my son has a phone contract in my name.
22:13He recently had a late payment on the account, which is showing on my credit report.
22:17Do you have any advice?
22:18Well, just being... I need to make this blunt and I don't mean to be rude, Sandra.
22:23You have a phone contract you're letting your son use.
22:26Therefore, the debt is yours. It's on your credit file of yours.
22:29Whatever your relationship between the son.
22:31When you give somebody else money in your name, it's you that owe it.
22:35The first thing you need to do is make sure you've paid and pay on time in future.
22:40There's very little you're going to be able to do about it.
22:43The truth is, it's representing a real thing that's happened.
22:46It hasn't been paid. That's gone onto your credit file.
22:48It will have a negative effect. That's what credit scoring is all about.
22:52So, you need to just protect yourself in future.
22:54We can't tidy up things that are real.
22:56We can learn how to correct errors that shouldn't be on your file.
22:59Let's just ask John. Anything else you can think of that I've not said?
23:01No, it's exactly right. It's her account, her contract.
23:05So, actually, she's responsible for paying or showing up on her file.
23:08Bring it up to date as soon as possible and keep paying on time.
23:11And like you said, it will improve.
23:12It will improve. Within six months, it will start to get better.
23:14In two years, it should mostly be gone.
23:16But let me get on to the most important thing you need to do when it comes to credit.
23:22It's not your credit score. It's your credit file, also called your credit report.
23:27You should check your file at least annually and definitely before any major application you're going to make.
23:32Because if there's an error that stops you getting one, you've got too many applications on your file and you can start to go into a vicious circle.
23:38So, your credit file will list key information, the products you have, whether you've paid on time or any county court judgments against you, the electoral roll information.
23:45I want you to go through this line by line. Be a pedant. Be pedantic and I will give you a tick.
23:52Because even a small address error on an open account could block you in fraud scoring line by line.
24:02Now, for a general check, I would just do one agency.
24:05But if you're about to do a big application by that, I really mean a mortgage.
24:08I would check all three agencies because you don't know which one they're using.
24:11And one, if there is an error, they will pass it on to the others. It's safer to do it that way.
24:14You can see your files for free. You can use the statutory credit reports, which tend to be a bit slower or these ways are a bit quicker.
24:20For Equifax, Equifax Basic or ClearScore will give you a free report.
24:24For Experian, go to the free Experian app, relatively new that.
24:27For TransUnion, loads of bank websites and many credit help apps will also give you a TransUnion report.
24:34Big warning though, loads of them will try and sign you up to this.
24:37£15 a month credit monitoring service, everything you need.
24:40You don't need that to see your credit report and it's your credit report that really matters.
24:43So don't accidentally sign up for that if you don't need to.
24:46Final thought, we've been talking about student loans already.
24:48Student loan company loans do not go on your credit file.
24:53That isn't to say they can't affect your applications, but they don't affect it as debt.
24:58What they effectively do is they reduce your disposable income if you're paying off, if you're above that threshold,
25:03and you're paying off the 9%.
25:05So it's a bit like you earn less and that can still lead to rejections or getting worse products,
25:10but it's not because it's a debt on your credit file.
25:12It's just because you have lower disposable income, if that makes sense.
25:15Absolutely.
25:16We've got a virtual wall this evening.
25:18Jane is here.
25:19Jane, you've got a question for Martin.
25:20Good evening, Jane.
25:21Hi, Jane.
25:22Hi, Martin.
25:23Right, my question is, he used to have a good credit rating of about 750.
25:30After we manually underpaid by 55p, one bank loan instalment, the bank then incorrectly reported to the credit reference agency that we have missed six hold payments.
25:45Didn't find this out until earlier on this year when I had to check his credit file for something.
25:52We contacted the bank.
25:53The bank admitted they made an error.
25:55They've corrected the file now, but it's not really improved his credit score.
26:00It's gone from 277, which is what it dropped to now, to 377.
26:05And you are absolutely sure that they have corrected it on the credit file, that that information is right, and it's the same credit file that is of the report that you're looking at?
26:14Yeah.
26:15Well, that's a tough one.
26:16Luckily, I've got John here. John.
26:19That is a tough one.
26:20So, yeah, my first instinct would be to say, check all credit reports with the three credit reference agencies, make sure it's correct.
26:27It sounds a bit like they maybe haven't updated the credit reference agencies with the right information.
26:33But if that's the case, if it is correct, there might be other factors that are influencing the credit score.
26:40So, go through your credit report, have a look, see if there's something else.
26:43How recently was this? How recent was it?
26:45Right.
26:46So, we found out in September, contacted the bank.
26:50The bank admitted their mistake.
26:52I think this could literally...
26:54Sorry, they're telling me to go to break.
26:55I think this could literally be that they've just not updated it in time.
26:59Keep monitoring over the next month to six weeks.
27:01If it hasn't worked, you apply to have a notification on your file,
27:05a notice of correction put on your file where you write that this was a mistake and hasn't really happened.
27:10You write back to the bank and you put in a dispute with the credit reference agency that something is going wrong and you want it fixed.
27:16And you absolutely have a right to do that.
27:18But I suspect some just don't update that quickly and it's probably just an updating issue and it will fix itself.
27:23It should fix itself, shouldn't it?
27:24Yeah, they update every month.
27:26Go to break, go to break, go to break.
27:27Thank you very much.
27:29Okay.
27:30Well, coming up, we're going to be talking about what actually happens when you apply for credit.
27:34Plus, Martin, you're taking us to your credit pub.
27:37My credit pub indeed.
27:38You will find out more.
27:39I'll have some water.
27:40Okay, we'll see you after this.
27:41Welcome back to our credit scoring special.
27:55We've got this question that's coming from Lainey just for you, Martin.
27:58I have a clear score credit score of 1,000, but I can't get a 0% balance transfer card to help me clear my credit card debts.
28:07I keep getting refused.
28:08Why could this be?
28:09Well, I'm hoping you've started to work out why.
28:12Let's go straight back into the big briefing now.
28:14Well, there you go.
28:15I'd written it there.
28:16What happens when you apply?
28:17You can still be rejected, Lainey, with a perfect credit score.
28:21Firms use information from your credit file, but they also use information from your application form, including that all-important income and any past dealings they've had with you.
28:29So, if it's a bank that maybe you've had good dealings with, it might be more helpful.
28:34If it's a bank you've not had good dealings with, it might be more likely to reject than others.
28:38But remember, lender's affordability score 2, which is just as important.
28:45Let me delve into that into a little bit more detail with you now.
28:48Here we go.
28:49So, this is just to give you an example of the type of things that's going on.
28:53I'm not going to labour it too much because every lender will work slightly differently.
28:56Here's some of the type of things they will look at.
28:58Remember, it involves your income. You'll see how much of this does.
29:01First, your debt ratio.
29:02How much unsecured debt, loans, credit cards, overdrafts, not mortgages, not student loans, do you have as a percentage of your annual income?
29:10You've got £20,000 on credit cards, you earn £40,000.
29:13That's 50%, and it uses this scale.
29:16There you go.
29:17That's okay.
29:18It's not good.
29:19It's a bit of a problem.
29:20What do you do?
29:21Well, try and reduce your debt or, of course, try and improve your income, which may be a bit more difficult.
29:25The next one, credit utilisation.
29:28This is the amount of the available credit you have that you are using.
29:31It works on the same scale as the other.
29:34So, £100 debt on a credit card with £1,000 credit limit is 10% credit utilisation.
29:38But it's looking across all of your debts.
29:41Now, the really important thing here is when this is used, it only really matters if you have a high debt ratio.
29:47If you've got a lot of debt, this matters.
29:49If you've only got a tiny bit of debt, the fact you're using all of it isn't that relevant if it's only a small proportion of your income.
29:54Again, you try and reduce your card or overdraft jet, or mathematically, you try and get more credit.
29:59But that causes you problems in other forms of credit scoring, so I probably wouldn't bother with that.
30:03It's the second thing they look at.
30:04And the third is your disposable income.
30:07The spare cash each month after bills and essentials.
30:10Now, with cards, loans and mortgages, actually, they're mostly doing a statistical estimate.
30:15They look at what your main outgoings are, but for your spending, they're not really looking at your spending.
30:20They're looking at what somebody in your position would statistically be likely to spend, so you can't impact it that much.
30:25But it's still worth, before a mortgage application, just being careful and going frugal.
30:29So, you're starting to see how much more complicated than the pure credit score this is.
30:33And we get more for credit card acceptance, because your acceptance tends to be on your credit score.
30:40Will I get accepted or not?
30:41The affordability score dictates your credit limit.
30:44How much will you be able to borrow on the card?
30:46Because it's a variable credit limit. Acceptance is binary, this is variable.
30:49With a loan, it's more weighted to affordability score.
30:53This is why, think about this, this really explains everything.
30:56You are one person, you apply to one lender, they accept you for a £3,000 loan,
31:02you've got the same credit score, everything else is the same.
31:06It's not about your credit score, it's about your affordability score.
31:10Mortgage acceptance, again, more weighted towards affordability scoring.
31:15Now, one of the things going on there is probably over-application.
31:19You've applied too many times and that can be dangerous.
31:22Applying can mark your credit file, even if you don't get accepted.
31:25So, if possible, don't apply. Go onto an eligibility comparison.
31:30Get a comparison on a comparison site that avoids heart searches
31:34and it shows you your likely odds of acceptance for different cards.
31:38Then you can home in on the best card.
31:40Crucially, these use soft searches, so you see these searches on your file,
31:44lenders can't factor them in, so they're safe to do.
31:47I suspect you've been over-applying.
31:49Go and do an eligibility calculator if your score's low, give it six weeks or so.
31:53And then try again, or even three months, and then things may have softened.
31:57Anything else or are we good?
31:58Exactly right. Take a break from applying for about three months
32:01and then use the eligibility check.
32:02Perfect. OK, there we go. We both agree. Cool.
32:04OK, there's this that's coming as well from Stephen.
32:07He's asking, I've got an excellent credit score,
32:09but I want to change to an interest-free balance transfer card.
32:13Will my credit score go down? Who cares?
32:15Stephen, I genuinely don't care. For a very simple reason.
32:19First of all, it's only your credit score, it's only an illustration,
32:21but more importantly, I tend to think of managing your credit worthiness like saving.
32:26I'm saving up for a rainy day in case I need it.
32:29What is the most important use of your credit score?
32:31To cut the cost of existing debt, which is what a balance transfer is.
32:35So use it. It is far better to have a lower credit score and better finances
32:40and cheaper debt than a good credit score and you're paying over the odds.
32:43That's what you're building your credit score for.
32:45If your credit score goes down, it goes down.
32:47You've got a card that cuts the cost of your debts. Hurrah!
32:51Yes, Stephen.
32:53Sorry, Mayan. Right.
32:55This is coming from Ahmed. I think quite an important question.
32:57What's the safest checklist to build a strong credit history from 18?
33:01Can I have me pub?
33:03Bringing me pub.
33:05Now, it's the borrower's return, everybody.
33:09And, is it Anne? Anne volunteered in the break that she's going to come and sit in my pub.
33:15Come up the stairs, my love.
33:17There we go. Just wait until we don't need to get hurt.
33:19If you go and sit over there.
33:21This is the prop. Do not drink it. It might poison you.
33:25Okay. So this, I just want so people understand how this works.
33:29We're going to play a game.
33:31You're in a pub. This is what happens.
33:33You're sitting there.
33:35Ooh! Anne, how are you?
33:37Oh, it's lovely to see you.
33:39I forgot my wallet.
33:41Oh, I'm so sorry.
33:43Could you lend me 20 quid and I'll buy you...
33:45Give it you back tomorrow and I'll buy you a pint as well.
33:47Now, I have done this about 40 times before and every single time I have done it I have always paid back the next day and I have always bought a pint on top.
33:59Would you lend me 20 quid?
34:01Because it's you, Martin, I would.
34:03No, but even if it wasn't me...
34:05No, probably not.
34:07Well...
34:09I'm a fan.
34:11There's always one.
34:13Yes, I would.
34:15I'm very glad you said that.
34:17Next example. Here we go.
34:19Anne, how are you?
34:21Great, thank you.
34:23Oh no, I forgot my wallet.
34:25Tell you what, could you lend me 20 quid and I'll give it you back tomorrow and I'll buy you a pint as well.
34:29Now, this person has done this 30 times before, always forgets to pay back the next day, never buys the pint on top and always has to be chased to give the money.
34:39Would you lend it to them?
34:41If their name was Martin Lewis, yes, but no otherwise.
34:45No one else, so you're not giving it, good.
34:47No.
34:48Final one.
34:50She's hard work.
34:52Simple example.
34:54Hi.
34:58Hi.
34:59Hi.
35:00Nice to meet you.
35:01Oh no, I forgot my wallet.
35:03Would you lend me 20 quid and I'll buy you a pint tomorrow?
35:06You have never met this person before in your life.
35:09You do not know who they are, it's not Martin Lewis.
35:12Would you lend to them?
35:14No.
35:15No.
35:16No.
35:17Okay.
35:18This is credit scoring.
35:19First example has a good credit history, we know that they're repaid, we can predict their future behaviour based on their past, they're a pretty safe bet.
35:24Second person, we predict their future behaviour based on their past, they're not a safe bet.
35:28Third person may be lovely, but you don't know them, you have no data.
35:32No data gets rejection, that's how credit scoring works.
35:35And if you'd like to go back there before they move the puddle away, thank you very much for that everybody.
35:39I know we're on the wrong channel.
35:42Get my pub out of here.
35:45Okay.
35:46Thanks chaps.
35:47While they do that, two biggest reasons people are rejected.
35:51Your past behaviour and they don't have enough data.
35:54How do you build data?
35:55You need credit to get credit, but how do you get credit when you don't have it?
36:01You get what's called a build or a rebuild credit card.
36:04Easy to get, they have high interest.
36:06Go on to an eligibility calculator for a rebuild card.
36:09If you can get them, there are a couple that give spending rewards.
36:11Tesco Foundation card, Asda money, terrible interest rates.
36:14Here's how you use them.
36:15At no cost.
36:16Spend 50 to 100 quid a month on them.
36:18Just your normal spending, don't spend anything that you wouldn't spend.
36:20Pay it off.
36:21In full!
36:23In full!
36:24Preferably provide direct debit.
36:25Never miss repayments.
36:26Never withdraw cash, that's always bad.
36:28Never bust your credit limit.
36:29After a year or so, with no other issues, your credit worthiness should improve.
36:33My problem with an 18-year-old, only do it with an 18-year-old who's trusted and will do this sensibly and not realise it's just free money.
36:40Just know it's a way to build their credit score.
36:43You could even do it with two cards and don't use credit rebuild schemes.
36:46Can you tell again they're going, go to break, go to break?
36:49But hopefully that makes sense.
36:51Get yourself a credit rebuild, but use it carefully.
36:54Never overspend.
36:55Pay it off in full.
36:56Absolutely.
36:57Thank you very much, Martin.
36:58Now, coming up next, 10 ways to be financially fit and the rest of news you can use, including half-priced Christmas trees.
37:04Well, welcome back to the show.
37:17They are loving this credit score special, but Martin, what I want to know, how do you actually boost your credit worthiness?
37:24That's what we want to know.
37:25Well, the honest truth about this is, I don't know if I can use this phrase, but it's what we called it when I was growing up.
37:30It's a bit like going on the pool, financially.
37:33You all right, Anne?
37:36So, the truth about going on the pool is there's lots you can do to make yourself look better, but different people are attracted to different things.
37:43So, there's no perfect solution, but what I've got here is 10 tips to make you financially fitter and more fanciable.
37:55Here we are.
37:56So, the first one, use consistent answers on every application.
38:00Now, what do I mean by that?
38:01First of all, they like stability, but more importantly, if you get it wrong, you can be triggered out of fraud scoring.
38:06So, if you could be a marketing assistant or a promotions assistant, don't vary the term.
38:11Use the same term every time.
38:13If you've got more than one mobile, use the same mobile on every application.
38:16Of course, if your job changes, then you change what you put in, but stability is important.
38:20Next, get on the electoral roll if you want.
38:22It's a big problem for credit scoring if you're not.
38:24You can still opt out of the open register.
38:26That's the thing that stops you getting junk mail.
38:28Opt out of the open register to not get junk mail.
38:30For a national, then you can ask for a notice of correction and that can prove your residency and help.
38:36Yes? Yes.
38:37Yes.
38:38Right.
38:39Secondly, you can snog or marry who you like.
38:41You have my permission.
38:42Financially.
38:43That will not affect your credit.
38:46What will a joint products?
38:49Mortgage, loan, bank accounts.
38:51No such thing as a joint credit card.
38:52It's a second card holder.
38:53If you even apply, not have, but you apply for a joint product, that can financially link you.
38:59That means they can look at the other person's file when you're applying for credit.
39:04So if they've got a bad credit history, this could kibosh your applications.
39:08Be very, very careful before getting joint products.
39:11By the way, if you were jointly, had joint products with someone and you're no longer financially linked to them, then you apply for a notice of disassociation to all the credit reference agencies.
39:21But you have to be generally financially separate.
39:23Next one.
39:24Fascinating, this one.
39:25The first time I've said this, overpaying your mortgage may start to boost your credit worthiness.
39:30Check you shouldn't be saving.
39:31Go to a mortgage overpayment calculator to check.
39:33This is because Experian, the biggest reference for Reddits Agency, is adding it in its credit score and they advise companies on how they should do their own credit scoring.
39:41So we're likely to see more of it coming in the future, overpaying your mortgage.
39:45Carrying on.
39:46Let's get to more.
39:47Never miss or be late on repayments.
39:49That is so important.
39:50If you're not good, but you want to pay variable amounts, well at least set up a direct debit to pay the minimum each month and you can manually overpay on top.
39:58But at least that way you will never miss a repayment.
40:01Buy now, pay later is increasingly appearing on credit reports.
40:05Klarna and Zilch already report.
40:07The rest are likely to start doing so once regulation starts in the middle of next year.
40:12It might not feel like a debt, but buy now, pay later is a debt.
40:17So, if you pay it off on time, it can be positive.
40:21If you miss payments, it can be negative for your credit file.
40:24Not for credit files, it doesn't go on your credit score, but it can be negative for lenders can see it negatively.
40:30An overuse of it could be a danger sign, so think of it as a debt.
40:33Don't withdraw cash on credit cards, always a bad thing to do.
40:36It's expensive and if you do it a lot, it can be seen as poor money management.
40:39I know some of you are saying, but I do it abroad.
40:41If you're doing it one-off abroad because you've got a specialist overseas card, that's not so bad.
40:45It'll disappear off your file in a few months, the score lower.
40:48But be careful with that one.
40:50Time application is right.
40:51I talked earlier about the impact on your credit score, but actually,
40:54some things only last on your credit file for a set time.
40:57The bad stuff, CCJs, defaults, finished bankruptcy, stay for six years.
41:01Applications only for one year.
41:03So if something is just about to lapse, wait a week till it's gone before you do your application.
41:08Makes sense, doesn't it?
41:09Now, one I'm asked about all the time.
41:11Logically, if I pay £1,500 a month in rent, that should be a good indication that I can afford to pay £1,500 of mortgage.
41:21Shouldn't it?
41:22It should.
41:23It doesn't work like that.
41:24It should.
41:25But it's starting to be changed.
41:27There are ways you can apply to have paying rent on time factored into your credit score, which could, of course, improve your mortgage acceptability in future.
41:39So if you're a tenant, you can sign up to Canopy, which reports to the Experian credit file for free.
41:44You could sign up to Credit Ladder, which will report to one agency for free.
41:48So using those two in conjunction, you can get two of the three agencies.
41:51If you want all three of the agencies, you can pay Credit Ladder £60 a year and you'll get it to report to all three of the credit reference agencies.
42:00Clearly great if you pay your rent on time.
42:03Clearly not good for you if you miss or are late paying rents.
42:07Makes sense.
42:08Also worth noting, some big landlords, social housing landlords with over 500 properties, have the Experian Rental Exchange Initiative.
42:17They should have told you about it.
42:18That means they're reporting to credit files, but you could choose to opt out, for example, if you wanted.
42:22If you're paying rent on time, I wouldn't.
42:24And my final one, don't do little applications before a big one.
42:29If you want a credit reward card, but you're about to apply for a mortgage, do it after the mortgage application.
42:36The mortgage application is what matters. Applications do impact your credit worthiness.
42:41So put things in the right order when you're applying.
42:44And those together is how to be financially fitter and more fanciable.
42:48How are you doing?
42:53OK, you have got time for some quick news you can use.
42:56Okey-doke.
43:00Right, time for some quickies.
43:03First of all, state-owned bank or financial institution, NS&I, has boosted its British savings bond rates.
43:08You can see them there.
43:09They're all over 4%.
43:10Now, these are just fixed-rate savings by another name.
43:12Let's not get overcomplicated.
43:14The rate is good.
43:15It's not top.
43:16It's about 0.2 percentage points or 0.3 percentage points behind the very top open-market fixed-rate payer.
43:23But many people want a big name with their savings.
43:26NS&I is as big as it gets.
43:28And crucially, most savings are protected up to £85,000 per person per financial institution by the state.
43:35This is owned by the state.
43:36So every penny in there, even if it's more than that, is protected.
43:39So it's a good option for those with very large amounts.
43:42Maybe you sold your house seven months ago and you want to know what to do with the money.
43:46Next, a heads-up.
43:47You can get £10 to £60 West End theatre tickets if you've got a MasterCard.
43:51Starts next Tuesday, 10am.
43:53I'm doing it now because sun shows sell out quickly, so you want to be on at the exact moment.
43:57It's the official London Theatre New Year sale.
44:00First dibs for those people who got a MasterCard on 2026 performances,
44:04including Wicked, The Devil's Wears Prada, Back to the Future, The Producers, and six!
44:09That was just for my daughter, by the way.
44:12If you're watching, I love you.
44:14From tomorrow, Ryanair won't accept home-printed boarding passes.
44:18You must check in online or Varexat first.
44:20If not, you'll be charged up to £55.
44:22But if you have checked in online and your phone ran out of battery,
44:25they're no longer going to charge the £20 for printing a boarding pass at the airport.
44:29You can now do that for free.
44:30So in some ways, it's a win for some people.
44:32And then from Thursday, you can get 50% off three Christmas trees at Tesco.
44:37The club card holds us only in store.
44:40There's a six-foot Nordman fur, these are all real trees, £20.
44:43So half 40 down to 20.
44:45Three-and-a-half-foot potted tree for £15.
44:47Or a four-foot tree with lights for £20.
44:49And while we're speaking about Christmas, next Tuesday is the big one.
44:54We do it every year.
44:56Big audience, festive forecast, the Black Friday special, Christmas deals.
45:00It's all coming in.
45:02I'm even going to have to sing at the start of the show because that has suddenly become a tradition too.
45:06It's all going on.
45:07So do not miss it.
45:08Set your diary, eight o'clock next Tuesday, and have a pen and pencil or some note-taking with you.
45:13Because at the end, I'm running through all those deals and I'm going to be running through them at serious speed, Jeanette.
45:17Well, there you go.
45:20I've got one question for you.
45:23How is your voice doing?
45:24My voice is all right now, but you know I can't speak out when I've done the festive forecast that we'll go through next week.
45:28Ladies and gentlemen, thank you so much.
45:29You've got questions about Christmas deals or free cash from bank switching or children's savings?
45:33I'll be covering them all next week.
45:35Use the hashtag Martin Lewis.
45:36Any questions on what we've done today, get in touch with that as well.
45:38Jeanette, you've been wonderful.
45:39The audience here has been wonderful.
45:40A round of applause for John Webb and Anne.
45:42And you know what?
45:47If I drank, I'd say I'd be off to my pub now, but I don't really, so I'll just go and pretend afterwards anyway.
45:53That's it. Take care, everybody. Good night.
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