Money

Money matters: 'My credit score can affect buying a house and I had no idea'

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Capital One

We asked three women to share their personal finance diary over the course of a month, while getting savvy about their credit score. By using CreditWise by Capital One to see their full credit report and score, we’ll see what they learnt about their financial health and how they might be able to improve it. In this installment, talent agent Louise shares what she’s learnt in the process of saving up for her next life stage…

I’m in my mid-30s, and have a job I love as a talent agent. 

I’ve always been fairly good with money, but I’m buckling down now as my partner and I want to save for our wedding, and ideally, buy a house after. We’ve moved out to Windsor so that saving becomes a bit more achievable.

I’ve made some financial mistakes in the past and there’s a lot of big life changes for me coming up, so I was keen to understand my financial health better by looking at my credit score and keeping a money diary.

I was curious as to how my credit score had fared through some poor decisions as I hadn’t checked it in a while. When I logged into CreditWise, it turned out it was pretty positive, but it also made me realise there’s some more I can do to improve it.

Here’s how my month went. 

Week 1

Even just paying attention to how much I spent this first week has made me realise I spend too much money on eating out.

It’s definitely my biggest weakness. Although I’ve moved out of London, I still work in the city and enjoy meeting friends in town after work.

I’m also going on a short (cheap!) holiday at the end of this month, so I’ve spent a bit on clothes and things like train tickets to the airport this week. And I may have bought Secret Cinema tickets, too…

I already know that my day-to-day spending doesn’t actually impact my credit score, it’s about how I’ve managed money that I’ve borrowed on credit credit over time. So I used CreditWise this week to dig a bit deeper into my report.

It was useful in actually seeing where I’d gone wrong before. And the tool also pointed out some helpful things that are impacting my score. For example, if you aren’t on the electoral roll at your current address (if you’re eligible to vote!), it can have an impact on your credit score. I’m not registered at my latest address – so this was impacting my score.

Lenders use the electoral roll to confirm your identity, so as time goes on staying at this address will help to improve my score, as we aren’t planning to move again before we buy. We’ll definitely remember now to re-register as soon as we move, though. 

Week 2

This week made me realise that clothes are my other biggest spending point - especially as we have this holiday coming up. I wanted a few things for that but in retrospect, it probably wasn’t necessary.

Over the bank holiday, my partner and I sat down and went through our savings. 

We had been talking about buying a new car and had been looking at what finance we might be offered.

This got me to thinking about my credit score again, as it would be going under my name so it’d be my score that’d be checked.

CreditWise showed me something I didn’t realise in my report - that closing old accounts isn’t always the best thing to do. This is because if you manage an account well over time, it can show that you’re reliable with money.

I thought it was only about making sure you paid it off, not how long you’ve had the card, so I’ve previously closed old credit card accounts after I’ve paid them off thinking that would be the best thing to do for my credit score. Actually, keeping the account open might help in some cases, as it helps you to build up credit history and by using it responsibly you prove can you’re reliable in the long-term.

Week 3

I was trying to keep my costs as low as possible this week as we are off on holiday soon, so I wanted to be able to spend a bit more next week without panicking.

We originally weren’t going to be able to afford to go on holiday this year because of the wedding and saving for a house, but some friends of ours have a family villa in Spain and offered us to join them. It was too good of an opportunity to miss out on.

Thinking of houses, I’m now closer to understanding the steps I need to take to apply for a mortgage. 

I had some credit card debt when I was younger left over from the odd big purchase, but it’s all paid off now. But I now know the sooner I can pay any credit off, the better – as it’ll help to keep my score in good shape.

Week 4

We were very lucky not to have to pay for accommodation on holiday and we had booked our flights months ago cheaply, so my only spending this week was while we were out there on food, drinks and a bit of travel.

We did go out for a few nice dinners and drinks as it was my birthday, but we also did a big supermarket shop at the beginning of the week as we had a proper kitchen at the villa so we ate a lot of meals in, too.

Keeping a money diary has been hugely helpful – it’s made me realise where my spending pitfalls lie and what my bad habits are. 

Using CreditWise has also encouraged me spend time to understand how credit scores work. It’s shown me that by sensibly using credit when I need to and paying it off in good time I can build up my credit score to show lenders that I can manage my money well.

We have taken on a lot trying to pay for a wedding and saving to buy a house at the same time but the move out of London, careful budgeting and a bit of a reality check about bad spending habits have all been big steps in helping me achieve both of these things in a relatively short time frame.

I will definitely continue to monitor my credit score with CreditWise and hope that when we get to the stage of applying for mortgages, this will stand me in good stead.

To find out your credit score, see your full report and find out what’s affecting it for free, visit CreditWise from Capital One.