Know your Credit Rating

Have you ever wondered why one company may be willing to lend you a substantial amount of money while others refuse you completely? The answer lies in your credit scoring. Your credit score may be within the acceptable limits of one company’s lending policy while outside the limits of another company.

How are Credit Ratings Calculated?

In the UK there are two main credit reference agencies, these are Equifax and Experian. These agencies keep record of such information as credit card debt, mortgage payments, bank accounts, unpaid bills, loan and hire purchase defaults and County Court Judgments. They currently have information of this kind on over 40 million British consumers. This information is sold to banks and other lenders who run a check over it every time you apply for credit.

Every lender is free to decide for themselves what kind of credit score will qualify an applicant for a particular product. Lenders typically target a specific market and look for different factors when borrowers apply. Your credit score will also dictate the level of interest you will be charged and what other options are open to you. Failure to receive a loan is often not because you have a bad credit score, but because you do not match the target market the lender is aiming at for that particular product.

It is worth knowing that every credit application you make is recorded on your record and this too is looked at by lenders. Applying for many different lines of credit within a short space of time will look bad on your report. To reduce the dangers of this, you may wish to ask a lender why you were turned down instead of simply moving on to another. You may be able to fix the problem to the lender’s satisfaction and obtain a loan from them, rather than moving from lender to lender. You also have a right to have any errors on your report corrected so checking this can be of great benefit.

Checking your Credit Rating

It is a good idea to check your record periodically. You don’t want to do this too frequently as it will show up on your record. You can pay for a credit check through either Experian or Equifax but sometimes free credic checks are also available online. Both companies use different information to compile their report so it is worth checking them both.

A poor credit rating will not necessarily mean you can’t obtain credit, but it will mean higher interest rates and less attractive terms such as having to secure the loan over your home. A lot depends on your credit report so it’s worth knowing your score.