Some people are refused a loan to clear debt. If this occurs you are advised to check your credit rating. A credit rating assesses the credit worthiness of an individual or company. Credit ratings are calculated from financial history and current assets and liabilities. Typically, a credit rating tells a lender or investor the probability of the subject being able to pay back a loan. However, in recent years, credit ratings have also been used to adjust insurance premiums, determine employment eligibility, and establish the amount of a utility or leasing deposit.A poor credit rating indicates a high risk of defaulting on a loan, and thus leads to high interest rates, or the refusal of a loan by the creditor. | | If you are looking for credit repair advice, please be careful!
| If you are looking for credit repair advice, please be careful when dealing with companies which claim they can 'clean up' your credit history. You'll find the ads in newspapers and magazines and even on the TV or the radio. You can sort out your credit report yourself or with expert help FREE OF CHARGE. You do not need to pay for credit repair advice. | | | - You can get free advice about County Court Judgments, bankruptcy, defaulted accounts or other arrears
- You can get free advice on how to sort out your debts and how to apply for credit even if your past is not perfect
- You can get free advice about the contents of your credit report
What are lenders looking for?
As well as asking you for details of your income, employment status and assets, lenders use information from credit reference agencies to assess how well you have handled credit in the past, and therefore how much of a risk they are taking by lending money to you.
The agencies check your name and address against the electoral roll, so you may have problems if you are not on it.
You may also struggle to borrow money if you have never taken out credit before, or if you already have what the lender believes to be too many loans or credit cards.
There is no "blacklist" of people who will not be given credit - each lender analyses the information according to its own rules, so you may be turned down by one company but accepted by another.
However, beware of making multiple applications, because many lenders take a negative view of a large number of credit searches in a short period.
What can you do if you are refused credit?
No lender has to provide credit to you. It can turn you down altogether, offer to lend less than you requested, or charge a higher rate of interest.
However, you can ask it to reconsider if it made its decision just using a computerised credit scoring system or if you believe you have further relevant information.
The lender does not have to provide a detailed explanation of its actions, but it must tell you the name of the credit reference agency which supplied information about you.
Checking your file
Even if you have not been turned down for credit, it is a good idea to check your file regularly - perhaps once a year - to ensure the information held is correct.
Lenders use all three agencies so you need to contact each of them.
Under the Data Protection Act, credit reference agencies must provide you with a "Statutory Credit Report" for a fixed fee of £2. You need to provide your full name, date of birth, current address and former addresses for the previous six years.
The statutory report contains your basic credit file and should be posted to you within seven working days although agencies can ask for further proof of your identity before supplying the information.
Each agency will provide more detailed information - including in some cases instant, continuing and online access to your file - for a higher fee.