When you apply for a mobile phone contract, mortgage or overdraft, or a credit card; lenders normally take time to check your credit report. They will check how much credit you have so far been given and how your repayment history is like. Based on your information and other vital information that they get to ask alongside in your application, they will then be able to decide if you have the potential to repay the credit that they offer.
Your credit report, therefore, plays such a vital role in determining the type of financial products that you can access. It’s more like a financial CV that provides lenders with valuable information about your identity and whether you are a reliable borrower. Credit reports are normally compiled by commercial organizations which are also referred to us credit reference agencies.
There are likely to be about three different versions of your credit report since lenders don’t always share the same information with the major referencing agencies.
Data Found in Credit Report
Some of the information that is found in the credit report includes;
- You address details such as; the electoral roll information with your current address. It also has some of the previous addresses that you have previously used.
- Financial credit agreements such as; mortgages, credit cards, loans, and overdrafts. It also includes any late payments or missed payments.
- It also has public records such as; county court judgments (CCJs), insolvencies and bankruptcies.
- It has financial associates; this includes a person that you have taken some joint mortgage with. Lenders can also check their financial behavior when you apply for credit.
Data not Found in Credit Report
Some of the data that you’re not likely to find in your credit report include;
- Your employment history, your criminal records, savings accounts, ethnicity, medical records, religion, or political affiliation.
The information that’s available on your credit report is normally used by lenders to help with establishing your financial behavior. They use unique criteria to review the information alongside some other information that you might have provided. Such extra information that they get to review may include; your job or salary, and other sources of income. The information that they get helps with determining whether you’re a good candidate for credit.
The reason for assessing your data is to help them establish whether you are capable of repaying whatever they lend you. It’s important to note that lenders only get to assess your credit if they have a legitimate business reason.
Another reason for assessing your credit report especially for the organizations is to ascertain your identity as that helps with the prevention of fraud. Any data that’s available on your credit report is subject to the Data Protection Act. It states that we have an obligation to ensure that the information in the report is accurate and also up-to-date. That’s an issue that many lenders take quite seriously.
Why you should check your credit report
Before you set out to apply for credit; it’s advisable that you take time and check your credit rating. This will help you identify some mistakes that you can avoid so as to increase your chances of getting the best credit deals. You will also get to identify if there exist any fraudulent credit applications that have been made to your name. Since the information help with the different agencies that may differ, you should take time and check with all the credit listing agencies.
All through your life, your credit score is likely to have a huge impact on the financial products that you take. When applying for a mortgage or a credit card, the credit score can be used to help with determining whether your application is accepted. Those who have a higher credit score are more likely to get credit easily as they are considered lower risk. It’s also important to note that each lender has a different policy for setting a credit score. If in case you fail to meet the criteria of one lender then you can as well try with another lender.
Before applying with another lender, ensure that you also ascertain why you might have been denied credit by the previous lender. Having too many credit searches within a short period of time can also have a negative impact on your possibility to get credit.
Factors that affect credit score
Your credit score is normally based on your credit report. There are a number of factors that influence the credit rating and having knowledge of them is vital. Here are some of the factors that affect credit score;
- History of credit account payments
- Credit searches, this normally happens when a credit application is made.
- The public records
Simple steps to help manage credit rating
- Review your credit report regularly to help in ensuring that the information shared is correct.
- Ensure that you don’t miss any credit payments.
- Close the unused credit accounts. Having a large overall credit limit can impact your ability to access credit.
- Register on the electoral roll.
Attaining a good credit score
Having a good credit rating comes from having a history of managing your finances responsibly. It really doesn’t mean that you shouldn’t borrow; in fact, lending companies prefer a good track record of borrowing and timely repayments. To attain a good credit score you should take the following into account;
- Ensure that you only borrow that which you can afford to repay.
- Consider setting up direct debits. Lending companies prefer prompt payments.
- Pay off credit if you can manage.
- Keep your old accounts well managed.
- Register as a voter in your current address.
- Protect yourself and credit score by not becoming a victim of identity theft or fraud.
The following factors are considered to be bad for your credit report;
- Avoid setting up new accounts frequently
- Try not to maximize your credit card limit. Avoid exhausting your overdraft.
- You should not apply too often for credit.
- Avoid borrowing more than you can afford.
- Try to avoid missing payments
Apart from the information that’s already available on your credit report, the lending company may also ask a number of questions as well.