Personal Finance 101 - Credit Checks

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					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 2005 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 (> ) and Equifax (
/> ). 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 (
/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

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.

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