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Any lender decides whether to offer you a loan, give you a credit card or extend any form of credit based on their view of your ability to repay that borrowed money plus whatever interest they charge.They need to make a judgement about how responsible a borrower you will be and how much money they will make out of offering you a line of credit before they advance you the cash. They do this by referring to their own records if you are an existing customer and searching your Credit File or Credit Report. This is a history of all your past credit held by Credit Reference Agencies like Experian, Equifax or Call Credit. Generally, a higher score suggests that you are less likely to have problems repaying credit.
Your Credit Score is basically a number that summarises the credit information on your Credit Report. There is no such thing as a “standard credit rating” or a universally agreed “credit rating system” and (although you might not think so) the “credit blacklist” does not exist either. Just because one company rejects you doesn't automatically mean another one will. Your Credit Score is determined by each separate lender making their own judgements. They will all score you differently even though the information they use from your Credit File to reach that judgment is the same for everyone.
Some lenders may request that a Credit Score is provided along with your Credit Report by the Credit Reference Agency. Different agencies have different ways of calculating your Credit Score and some lenders may specify which method they want. Most lenders will request just the Credit Report and apply their own scoring system. Precisely how those Credit Scores are arrived at is never made public. The Credit Score number assigned to you by an agency, like Experian for example may be different to the Credit Score number a lender will give you. You can reasonably assume that if the Credit Reference Agency’s score is good, the lender’s score will probably be good too. Equally, if it’s bad, then most lenders' scoring will be just as bad.
Credit Scoring is the lender’s attempt to predict your likely future behaviour based on the information in your Credit Report. Lenders should also assess if you can afford the credit limit assigned and ensure that you only take the credit that you can afford. Credit Scoring not only dictates what products you'll be considered for, it can also determine how good a deal you’ll get on interest rates for example.
You can’t influence the method a lender will use to calculate your Credit Score directly, but that score is based on the information held on your Credit Report. So it’s important to make sure that the information about you on your Credit Report is as up to date, accurate and attractive as possible. Improvements to your credit history can be achieved by doing this, but the best way to increase your chances of being accepted for credit is to manage your finances and your existing credit responsibly and prudently. Maintaining accurate information on your Credit Report won’t change anything if you continue to over commit or stretch yourself with credit commitments you really can’t support, miss payments, make late payments or fail to advise lenders of any change in your circumstances.
It’s important to keep a regular check on how healthy your general credit rating is. By regularly checking your Credit Report you will also be able to detect the early warning signs of identity fraud. Your adverse credit rating could be a result of someone else stealing your personal details such as date of birth or your current and previous address without your knowledge to buy goods, get loans, passports, credit cards or bank accounts using your name.
You’ve a legal right under the Consumer Credit Act to demand to see your file held by these Credit Reference Agencies. You can do this quickly and easily online by checking your credit rating and following the instructions.
If you don’t have the Internet, you can write to the Credit Reference Agency, which then has seven working days to get back to you with the information. Give them any other names you have been known by (like your maiden name before you got married), your full current address and any other addresses where you have lived over the past six years, something that proves your name and address like a gas, electric or telephone bill (you can ask for them to be returned), your date of birth and a cheque or postal order (do not send cash) for £2 made payable to the credit agency you are contacting. Experian and Equifax are the two main agencies most lenders use.
When you get your Credit Report, read through it and the notes supplied to make sure the information is accurate and up-to-date. If you think anything in your credit history is wrong, contact the credit agency to alert them to the fact that the entry is incorrect. They may then require you to contact the original lender who supplied the information, explain the problem and ask them to remove or change the entry. If it really is wrong, they are required by law to change or remove it.
If you’ve signed up for one of the Internet-based services like Credit Expert, they can help you amend, change or delete wrong information on your Credit Report. There are other steps you can take to improve your Credit Score:
Follow these steps to build your credit history and when you check your credit reference file in the future you should enjoy an improved credit rating.
