Credit Reports Explained Part 01

HOW YOUR CREDIT REPORT AFFECTS YOU

The contents of your personal credit report are very important, and help determine whether or not a lender
accepts your application for credit, such as a credit card,loan or mortgage.
Your credit report can affect your ability to:
• Get a loan
• Get a credit card
• Obtain a mortgage
• Get the best credit deals
As the information held about you by credit reference agencies like Experian is used to help determine what
credit you can obtain, it is important that those details are correct.

WHAT INFORMATION IS CONTAINED IN A CREDITREPORT?

Credit references agencies – the largest in the UK is Experian – collate information about your financial
background and past behaviour and format this data into your unique credit report.
Lenders see this information when they decide whether or not to offer you a loan, mortgage or credit card.
It influences their assessment of the likelihood that you will repay them.
Information comes from two main sources:

• Public records, such as court judgements, individual voluntary arrangements and bankruptcies. Your credit
report also shows whether you are registered to vote –lenders use this as a precaution against fraud, to check that you are who you claim to be and live where you say you do.

• Information from lenders and financial institutions, such as records of the number of loans you have and whether you have ever missed a repayment.

It’s important that all this information is as up to date as possible and correctly reflects your circumstances. Then lenders will make the best-informed decisions – and you will get the right deal.

WHY YOU CAN GET REFUSED CREDIT

Lenders turn down millions of applications every year. If you are one of the unlucky ones, you should be given an explanation. If not, ask for some guidance.

For example, you may appear to be carrying too much debt from other sources or your credit report rang alarm bells, perhaps because you had missed some payments on a previous loan. It may simply be that you do not fit the lender’s profile for a particular loan.

You can always appeal against the decision. This may give you chance to provide further information. For example, your poor credit record may stem from a one-off event that no longer applies such as time off work you may have had during a serious illness or enforced redundancy.


Finally, there’s nothing to prevent you applying to another company. Different lenders may take a different view.
But be careful how many applications for credit you make in the short term.

If you allow a significant number of companies to search your credit report, this could damage your credit rating as it could be interpreted to mean that you are desperate for money or possibly that someone is trying to commit fraud.

It is always sensible to check your credit report before making any further applications. That way, you can be sure that the information in it is up to date and correctly reflects your circumstances.

THE CREDIT BLACKLIST MYTH

It has never seemed easier to borrow money, so if you do get turned down, the obvious question is “Why?” swiftly followed by the nasty suspicion, “Maybe I’m on a credit blacklist.”
The good news is that you're not. In fact, there’s no such thing as a credit blacklist. But there is a host of reasons why you might be rejected.

Your credit report has worried the lender:

This unique, personal record of your credit history could show that you already have a number of loans and the lender may be worried that you will not be able to repay another.

You may not fit the lender’s profile:

For example, a credit card issuer may only give cards to people who already have fewer than three, or a mortgage lender may specialise in first-time buyers.

You are a non-standard credit risk:

According to Datamonitor, the independent market analyst, more than one in five adults in the UK are deemed nonstandard.
They may include the self-employed, others who cannot provide sufficient proof of income and people who
have an outstanding county court judgment (CCJ) against them or have had their homes repossessed for nonpayment of mortgage.

You move around:

Credit companies look for stability – for example, living at the same address for at least three years or having a longterm relationship with the same bank. So, if you move around a lot or switch banks often, this may tell against you.

Your credit score wasn’t high enough.

Lenders generally base their decisions on a credit score,which they calculate using the information in your credit report and your application. Every lender has a different formula which can even vary from one type of loan to another.

To Be continued...soon