Understanding Your Credit Rating

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. Read more

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

Clever consumers check their credit reports, says Experian

With attractive loan deals becoming increasingly difficult to come by, Experian has offered consumers advice on how to make sure that their applications stand the best chance of being accepted.

According to James Jones, the consumer education manager at Experian, people should take a look at their credit reports before making a loan application to ensure that all the information on them is correct.

“Lenders are using credit histories not only to decide whether to say yes or no to people but also to decide what rates to charge.

“So, clever consumers are checking their credit reports,” Mr Jones concluded.

Research from CreditExpert.co.uk has revealed that many people do not feel confident that they will be successful when making a loan application.

The company’s study found that 23 per cent of those polled believe they will be refused a loan of £1,000 and 42 per cent think they would not be able to secure a loan of £10,000.

Tags: CreditExpert, loan deals, TransUnion, company, equifax

ID fraud insurance should offer a copy of credit files, says expert

People looking for ID fraud insurance should make sure the policy offers them a copy of their credit file, Equifax has said.

Neil Munroe, external affairs director of the company, said that if someone steals a person’s ID, they are likely to try to apply for credit in that name so a policy that provides a copy of the credit file is important.

According to CIFAS, the UK’s fraud prevention service, there were 77,500 cases of ID fraud last year.

Earlier this year, research carried out by CPP revealed that London is the worst location for credit and debt card fraud and theft.

Commenting on what people should look for when buying an ID fraud insurance policy, Mr Monroe said: “Some policies may well do more to help take over your case and sort it out for you, and these would be more valuable than ones that just offer you basic advice.”

Tags: CPP, equifax, director of the company, credit files, said.neil munroe, london, Financial economics, Credit rating agencies

Credit crisis may force people to use more expensive lenders

The global credit crunch and more restrictive borrowing terms that many lenders have implemented may force consumers to go to higher-cost lenders, an expert from Equifax has said.

According to Credit Action, personal debt in the UK stood at £1,421 billion at the end of February 2008.

Total lending in February was up by £9.8 billion on the previous month, of which secured lending accounted for £7.4 billion and consumer credit was £2.4 billion.

Neil Munroe, external affairs director for Equifax, said that if banks reject more loan applications people “may be forced into more high-cost borrowing, so forced down into the subprime or near-prime market, whereas before they might not have considered going there”.

However, he also pointed out that banks have an “appetite” to lend people money, they will simply be more cautious when deciding whether to lend to people who they believe may not be in a position to repay the loan.

Tags: Neil Munroe, equifax, consumer credit, credit crisis, uk, External Commercial Borrowing, secured lending

Lending to get tighter in the New Year

The effects of the credit crunch will see lenders “tightening up” and looking at minor misdemeanours which may well have been ignored in the past, claim financial experts.

Equifax has said there could be an increase in the number of loan applications in the New Year, as lenders look more carefully at a person’s payment history.

Neil Munroe, external affairs director for Equifax, said: “Any negativity that might not have been a problem in the past might rise in prominence.”

He also warned consumers that an increase in the number of applications within a short space of time can look suspect.

Repeated searches on a consumer’s history have the potential to affect a person’s credit rating.

The latest figures from Credit Action show that total consumer credit lending to individuals in October 2007 was £222 billion. This has increased 5.8 per cent in the last 12 month.

Total lending in October 2007 grew by £8.8 billion.

Tags: time, economics, finance, claim financial experts, equifax, personal finance, credit, Credit Action

Credit Card Balance Transfer Guide

A frequent mistake by many credit card holders is to run up a balance, which for one reason or another simply can’t be paid back in one go, so it starts incurring interest. And those interest payments can be crippling.

It’s no wonder the British public have been playing ‘hot potato’ with their credit cards; swapping balances here, there and everywhere. But this has its advantages and disadvantages.

Here’s a short guide to balance transfers.

Running up that bill

It’s very easy to run up a balance that sits like a lead weight on the statement every month. As soon as it’s there even the smallest change in interest rate could make quite a difference to your monthly outgoings.

So shop around!

Be brave, be bolshy!

If you have a fairly large balance and you’re feeling brave, it’s worth phoning the credit card company. When you get through, instead of dealing with the person at the call centre, ask to speak to somebody in the department who sets the interest rates.

All these companies are interested in getting your business and somebody, somewhere sets the rates they offer. Play one company off against another. Tell them what other companies have offered you and ask the question: can you go lower?

The chances are they probably will.

Choosing a credit card

Given that you are going to be getting your new credit card account with an opening balance on it you should probably go for the one offering the cheapest APR. That is not necessarily the one offering zero percent incentive for a few months. You need to be aware of what the APR will revert to when the offer period ends. If you decide to change to another credit card company at that time you may get a transfer fee levied at you and it can affect your credit rating if you change credit cards a lot.

It’s certainly not worth going with a credit card that charges you an annual fee – Why pay them twice! There are plenty of cards that don’t charge out there.

New doesn’t always mean better

Remember the golden rule, when you get that new card, don’t use it for anything else.

The chances are that if you do use it then on your next statement you will get two sets of interest and that second interest figure will be at a much higher rate than for the balance transfer. You’ve no excuse for being surprised, as it will all have been itemised in the small print of the terms and conditions…

Money down the drain

So as you pay your monthly fee into the account it will be deducted from the part of the account that is paying the least interest, not from the transaction that was incurred most recently. In which case, all your hard work researching and selecting the card in the first instance would have been wasted by a single slip up.

If you think you might be tempted like this, the answer is to leave your new card in a drawer where it’s out of harms way!

Credit, credit, credit: your rating

Frequently swapping your balance around from one credit card company to another can sometimes adversely affect your credit rating. Your credit rating is the information the lender companies use to decide how much credit they are going to give you.

The one who cannot be named

If every time you change cards you regularly clear the balance within the interest free period then the lending companies will start to see the game you are playing and can refuse to give you credit.

This is then reflected on your credit rating which means that other companies are even less likely to loan you money. From that point on it can be a downward spiral into credit rating hell.

Refuse me?!

In the UK there are two major credit checking companies that lenders use to check your credit worthiness. These are Experian and Equifax. Both these companies hold your credit history and you are entitled to see that information.

Stand and deliver

If you are refused a credit card it will be worth contacting the lender within twenty eight days of being refused to find out which of the two above agencies were used to provide your credit history.

Remember that you will have been refused credit by the company you approached for the credit card, not by Experian or Equifax; however, talking to them will allow you to see what’s on your record and then get an idea of why you were refused credit. In some circumstances you might even be able to reverse the decision.

Get out while you’re ahead

Assuming you did get the credit card you wanted and you have been given a good long introductory offer with low interest on the outstanding balance, how do you make the most of it?

The answer is simply to keep a record somewhere of when the offer expires. If you keep a diary, scribble it in there, or in your palm pilot, or in your desktop organiser – it doesn’t matter where, just keep a note somewhere obvious.

Have we been here before?

With the end of the introductory period written down you can then make an informed choice of whether to transfer to another card or not. With your new-found understanding of the credit rating system you could get hold of your credit rating and base you decision whether to move or not on that.

Whatever your decision your main aim should always be to prevent your credit card bill becoming overwhelming by accruing huge amounts of compound interest each month.

Tags: opening balance, conditions… money, balance transfer, equifax, small print, Credit card, Credit score