What's Your Credit Score?

When you apply for a homeowner loan, mortgage or credit card, the lender will check your credit record as part of processing your application. A poor credit score means .high risk. in the mind of the lender and can make it difficult to obtain a loan, lenders who lend in these circumstances tend to be more expensive because of the high interest charged.

It is common for lenders to request credit reports from the three main credit reference agencies, Experian, Equifax and TransUnion and use the mean score (average). Credit reference agencies are not responsible for assessing the information they hold, nor do they maintain a credit blacklist. It.s the job of the lender to assess the information and decide whether to lend or not. Although different lenders might work from the same credit report their scoring systems may be different, so you could be refused credit by one company and accepted by another.

The files that credit reference agencies maintain on all of us contain a variety of financial information; for example, a missed payment on your credit card will be visible on your credit report for 3 years, while a CCJ will be visible for six years. They also maintain details of bankruptcies, IVAs and information from the electoral roll.

However, that these credit reports can contain account histories that are incorrect, outdated and incomplete. Credit reference agencies do not verify information they receive from your creditors, the simply log it. Believe it or not, it is your responsibility to ensure your credit report is accurate and up to date.

An adverse credit rating can be expensive. Most loans and around 25% of credit cards charge a higher interest rate if you.re credit rating isn.t exactly perfect. So, it.s in your interest to ensure the details on your files are up to date and correct.

What information is used to calculate your credit score?

Credit scores are calculated on historical data:

1. Settlement history
2. Total outstanding debt
3. Length of credit history
4. Type of credit (secured or unsecured)
5. Frequency of borrowing.

N.B. Items 1 and 2 count towards 65% of your overall credit score.

So, based on historical data, your credit score provides the lender with a reliable indicator as to whether a loan should be granted or refused.

Have you been Refused Credit for no apparent reason?

If you have been refused credit it is most likely the result of an adverse credit report. Many credit reports contain inaccurate information which will affect your ability to borrow in the future and, in some cases, your ability to gain employment especially if you work in the financial sector.

A common reason for being refused credit is that you simply can.t be found on the local electoral role. If you haven.t registered yet you should correct this as soon as possible.

How do you check your credit score?

The lender you approached has no legal responsibility to tell you why you were refused a loan or supply any information regarding your credit score. However, the lender is obliged to give you the name, address and telephone number of the credit reference agency (or agencies) they used. You have 60 days after receiving the denial notice to request a free copy of the report. Gaining access to this report should tell you everything you need to know and catch any instances of identity theft.

How do you request a report?

To request a credit report write to one of the credit reference agencies giving your full name, previous name if married, address and how long you have resided at that address. Also include a copy of a recent utility bill. Also include any address where you have lived over the last 6 years.

Equifax
Credit File Advice Centre
PO Box 1140
Bradford
BD1 5US
http://www.equifax.com/

Experion
Consumer Help Service
PO Box 8000
NOTTINGHAM
NG1 5GX
http://www.experian.com/

TransUnion
P.O. Box 6790
Fullerton, CA 92834
http://www.transunion.com/

Its likely that each credit agency holds slightly different information depending on which agency your creditors report chose to. For this reason it is important that you check your credit report with all three agencies.

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