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We talk quite a bit on this blog about the importance of checking your credit rating and ensuring your credit record is accurate. uSwitch have pulled together 10 reasons why you should regularly check your credit rating.
Credit scoring is used by lenders as an assessment as to how likely it is that you will repay the money you borrow from them and that you'll make the repayments on time. The lenders allocate a certain number of points for each piece of information on you, for example, your income, the amount of debt you currently owe and your payment history. Along with the information you provide on your application, these details are used to calculate your credit score.
It's important to note that different lenders use different scoring systems and they're not disclosed so although you may be refused credit with one lender, you may be accepted with another.
Lenders will normally consult a credit reference agency to assist with credit scoring. The 3 main agencies in the UK are Experian, Equifax and CallCredit. Between the information on your application and the detail that credit reference agencies hold on you, lenders can build up a profile of the type of customer you'll be from:
You can request the information the credit reference agencies hold on you for a fee. It's vital to check that the details are correct including your payment history and your address details. If you spot an error, ask to have it amended immediately.
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Have you ever wondered what exactly a credit rating is and how lenders use it when you apply for credit?
When you apply for credit, the lender will make a decision on how much you can borrow and indeed, whether you can borrow at all, by looking at the information you provide on your application form as well as examining a record of your credit history.
There are 3 main agencies in the UK that compile credit histories - Equifax, Experian and CallCredit. Your record contains your address, previous addresses, any court judgments or bankruptcies against you and a record of your repayments to your previous and current creditors.
If you have been refused credit but you're not sure why, the first thing you should do is obtain a copy of your credit history by writing to one of the agencies. The most popular reason why you may be refused is that you have failed to make the repayments to previous or current creditors on time or have missed several payments.
Other factors which affect credit ratings include the number of applications for credit that you have made. Applying for credit to a number of lenders in a short period of time could indicate that you're in financial difficulty. On the flip side, those with no credit history may also find it difficult to obtain credit as they have no repayment history that creditors can use to determine whether they will pay on time.
Lenders prefer to give money to borrowers that they can trace so being on the electoral roll and having a landline telephone number will help. In addition, being employed, owning your own home and staying with your bank for a long time also helps.
With all this information stored in your credit history, it is wise to check your credit report on a regular basis to ensure there is no inaccurate information which may stand against you should you apply for credit.
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