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Understanding Your Credit Rating

April 14, 2009 by admin  
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A lender is not under any obligation to approve credit for you or to give you a loan. When you apply for credit, lenders look at many different factors in order to determine if you are a good risk to repay. It is important to have an income and you will have to supply proof of being employed. In addition to assessing your income and your existing payments, lenders also look at your credit rating. This alone is weighted heavily in the approval or denial of credit.

You should obtain a copy of your credit report so that you are prepared for what lenders learn about you through your rating. There are three main credit reporting agencies in the UK – Experian, Equifax and Call Credit. The report contains details of your personal information – your name and present address as well as previous addresses you have had. A person with several different addresses within a short period of time may not be seen as a good risk because it shows that you are unable to remain in one location for a very long time.

The bulk of your credit report deals with your credit history and this is the portion of the report that is of most interest to lenders. Here you will find a list of all your current accounts, the dates at which you opened these accounts and the amount of your monthly payment on each one. It also provides details of your payment history, such as whether or not you make your payments on time and whether or not you have any late or missed payments. All these details stay on your report for a six-year period.

All the accounts you have held in the past are also listed even though you may have them paid off in full. Every time you apply for credit and a lender looks at your credit rating, this shows up on your report. If you have applied for credit several times within a short period of time, this is looked upon negatively showing that you do need to have credit in order to function. The records of these searches will stay on your report for up to two years.

If you have ever had county judgements against you, filed for bankruptcy or had your house or car repossessed, these are also listed on your credit report. The report, however, does not have any details of your savings or checking accounts and personal information, such as medical and criminal records or religious affiliation.

When lenders look at your credit report, they will check to ensure that your name and address is on the electoral roll. If it is not on this list you may have problems obtaining credit. Since they do use your credit history as a guide in determining whether or not to approve your credit application, if this is the first time you have applied for a loan or credit card, you may also encounter difficulty. Not having a credit rating is almost as problematic as having a bad credit rating.

If you are turned down for credit, the first thing you should do is check your credit rating to ascertain the reasons. With the increase in , you may be a victim and have accounts in your name of which you are not aware. Since lenders do use all three agencies, you should obtain a copy of your report from each one. They are obligated to do so for a fixed fee of only £2.

Once you look at your report and find problem areas, you need to take steps to repair the negative items – by making sure that you make your payments on time and bringing your accounts up to date. It does take about six months for these to take effect with relation to your credit report. You also need to make sure that you don’t apply for credit within that time.

Tags: experian, credit reports, identity theft, religious affiliation, personal finance, credit application, equifax, period of time

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