Personal Finance 101 – Credit Checks
Credit cards, personal loans, mortgages and other forms of personal credit are an everyday part of financial life for all UK consumers. Looking at the figures for UK personal debt shows that Britain appears to be addicted to borrowing money and still continues obtaining more from the financial institutions. By the end of 2009 the UK personal debt levels stood at a record £1,148, with 83% of this debt consisting of secured mortgage loans. Due to the nations reliance on credit of all forms, it is extremely important to keep a close eye on your own personal financial history and keep up to date with the official credit check reports which can help prevent fraud, and make the difference between acceptance at a favourable interest rate, or outright rejection just when the money is needed the most.
In the UK there are two main credit reference agencies which hold a wide range of financial information detailing a person’s continually evolving financial history, these are Experian ( http://www.experian.co.uk/>http://www.experian.co.uk/ ) and Equifax (http://www.equifax.co.uk/>http://www.equifax.co.uk/ ). By obtaining a copy of your report from each of these sources, (as they may contain different information), you can not only check the accuracy of the information stored and look for any potentially fraudulent entries, but you can also request that any incorrect information is amended to prevent possible future credit problems.
Each lender will weigh the information contained in a person’s credit file differently. However there are universal contributing factors which include:
– Electoral Roll information for a person’s currently registered address. – Defaults on any financial repayment contracts, such as loans, mortgages, etc. – Employment history for mortgage, credit cards, loans, hire purchase and finance agreements. – Any County Court Judgments. – The complete amount owed and the number of credit facilities used. – The number of new credit facilities that have been applied for (both successful and unsuccessful applications). – The type of credit used. – Salary details given on the application form.
Lending organisations combine the data obtained through a credit report, along with information acquired from an application form, to produce a credit score. This score represents a measure of an applicant’s likelihood to repay debts and to make any repayments on time.
If an applicant’s score falls below the lenders acceptable risk threshold, or they don’t fit an ideal customer profile, then the application may be completely rejected. It is also possible that a low score may result in acceptance, but at a more expensive interest rate than might usually be offered.
Some credit card providers, such as the Asda supermarket chain’s finance services, now provide applicants with a copy of their credit reports with all applications, however, to obtain the best deal it is vitally important that borrowers do some shopping around. When shopping around for credit however, try to obtain as much information as possible prior to making a formal application for credit. Whenever any application for credit is made, a footprint is left on the credit record showing that a search has been made. Credit companies see lots of footprints as an indicator that the applicant may be in severe financial difficulties or even that some form of fraud may be evident. Using one of the various online financial comparison websites, such as Moneynet (http://www.moneynet.co.uk/loans/index.shtml>http://www.money net.co.uk/loans/index.shtml ), enables you to see what is on offer, and what general market rates are available, before any financial commitment or full credit search is required.
Even people who are not looking to obtain additional credit may find a credit report useful for peace of mind, and to ensure that their credit details are not being used for fraudulent applications, or as part of the growing disturbing phenomenon that is identity theft.
All information contained in this article, is for general information purposes only and should not be construed as advice under the Financial Services Act 1986.
You are strongly advised to take appropriate professional and legal advice before entering into any binding contracts.
Moneynet loan comparisons ( http://www.moneynet.co.uk/>http://www.moneynet.co.uk/ ) Experian credit reference agency ( http://www.experian.co.uk/>http://www.experian.co.uk/ ) Equifax credit reference agency (http://www.equifax.co.uk/>http://www.equifax.co.uk/ )
About the author:
Richard lives in Edinburgh, occasionally writing for the personal finance blog Cashzilla, and listens to music no one else likes.
Written by: R.Green
User Review( votes)
- 96The airwaves these days seem to be full of advertisements for consumers to obtain their credit reports and also apply for credit cards. Apart from encouraging consumers to obtain their credit reports, consumers are not told and do not fully understand why it is that important. Most people, after all,…
- 92Unfortunately, those people who have poor credit ratings, even those who are trying to reform their ways, are rarely taken seriously when trying to conduct normal transactions. A bad credit rating can make it exceedingly difficult to get important financing, such as car loans, mortgages, and credit cards. Fortunately, a bad…
- 90In the world of finances it is all about managing debt to maximize one’s buying power. Since a consumer’s credit score has a direct correlation on any financing or loan authorization, reviewing the accuracy of a credit report is a consumer savvy. Consequently, managing one’s personal finances for a better…
- 85Strange, penumbral, characters roam the boardrooms of banks in the countries in transition. Some of them pop apparently from nowhere, others are very well connected and equipped with the most excellent introductions. They all peddle financial transactions which are too good to be true and often are. In the unctuously…
- 84Moneynet, the personal finance specialist, is expanding its range of product guides to include financial lifestyle information to appeal to families, students and other consumer markets. Moneynet, the most established consumer research website in the UK has taken the initiative in response to concerns that consumers are becoming alienated by…
- 83Bad Credit Mortgage Refinance If you are looking to refinance your mortgage but believe you will be unable to because your credit may be challenged by late payments, bankruptcy, charge off's, or unpaid medical bills to name a few, don't worry, there is hope. There are literally thousands of lenders…
- 83Are Your Finances Prepared For Divorce? Life is hard and nothing is more testing and straining than going through a divorce. A divorce can indeed be a stressful time without the added pressures on ones finances. Besides emotional erosion, a divorce is also known to be a costly event in…
- 82Let's face it - currency isn't green anymore. Currency is a slab of rectangular plastic decorated in goldfish, landscapes, paintings or whatever - sporting a magical black strip on the rear side. Plastic is convenient, but dangerous. However, there are instances when credit cards can prove to be necessary. Emergencies,…
- 82You may find it difficult to manage finances together when you've been acustom to managing your finances alone. But when you become part of a couple, many things change, and your finances are no exception! Some couples take the traditional path of blending all their money together, however today more…
- 82Navigating the emotional and financial minefield of divorce is one of the toughest things you’ll ever do. Here’s a somewhat disheartening and sobering fact: the divorce rate in Canada has doubled from that of the early 70s. While the legalities of getting a divorce may have become somewhat easier in…
Share Your Thoughts
Category: Tips Articles