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Personal Finance 101 Credit Checks

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Personal Finance 101 Credit Checks Powered By Docstoc
					by: Richard Green

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 persons continually evolving financial history, these are Experian (
http://www.experian.co.uk/ ) and Equifax ( 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 persons credit file differently. However
there are universal contributing factors which include:

- Electoral Roll information for a persons 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 applicants likelihood to repay debts and to make any repayments on time.

If an applicants 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 chains 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.co.uk ( http://www.moneynet.co.uk/loans/index.shtml ), enables you to see what is on
offer, and what general market rates are available, before any fina!

ncial 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.

Disclaimer:

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.

Useful resources:

Moneynet loan comparisons ( http://www.moneynet.co.uk/loans/index.shtml )

Experian credit reference agency ( http://www.experian.co.uk/ )

Equifax credit reference agency ( http://www.equifax.co.uk/ )

This article was posted on January 28, 2006

				
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