There are 5 facts and 5 myths about credit!
We've all become so used to easy credit that today's financial climate can come as a shock can't it?
Reports of a massive increase in rejections by lenders can make getting that new credit card or mortgage deal feel like it might be a challenge.
In fact, there's plenty you can do to manage your credit rating; just follow our simple guide to what really matters to lenders and the myths you should ignore:
Here are some of the factors that could have a positive effect on your credit rating; and your chances of getting a good deal.
1. You have a credit track record
You might think a person with no debts would be attractive to lenders but if you've never borrowed anything, they can't judge whether you'll be reliable. You may stand a better chance if you have a couple of credit accounts (like a mobile phone account and a credit card) that you've managed well over time.
2. You're not overstretched
Your credit report will show outstanding balances on store and credit cards and how much you owe on loans and mortgages. If lenders think that you're already at the limit of what you can afford, they may not want to grant you more credit; so it could be time to cut back, pay off a few accounts entirely and close any that you no longer use.
3. You haven't made lots of applications lately
Your credit report records the searches lenders make whenever you apply to them. If there are a high number of these footprints in recent months, lenders can think you're desperate for money or even that a fraud is being planned. If a lender needs to search your credit report before they give you a quote it's important to ensure that you ask for a "quotation search".
Check your credit report before you make a new application to ensure that it accurately reflects your intentions. If it doesn't, ask the relevant lender to set the record straight.
4. You don't have a history of missed repayments or bad debts
These sound warning bells, as lenders may fear that you will let them down too. Missed repayments stay on your credit report for at least 36 months, court judgments, IVAs and bankruptcies for at least six years, so you could have trouble getting credit years after you've satisfied judgments or been discharged from bankruptcy.
If special circumstances explain your problems (for example, you suffered a serious illness) you can add a note to your credit report. Lenders may take this into account.
5. You've registered to vote at your current address
Lenders use the electoral roll as a precaution against fraud, to help check that you are who you say who you are and live where you claim to live. If you are registered at a different address to the one on your application form or don't appear at all, they may ask for proof of residence or even turn you down.
Fortunately, it's easy to put matters right. All you need to do is contact your local authority or download a voter registration form at www.aboutmyvote.co.uk
Click here to check this information on your Experian credit report for free.
Don't worry about any of these factors leading to a rejection; they won't affect your credit rating.
1. Previous occupants of your address can affect your credit rating
They could have been millionaires or bankrupt, but it makes no difference to a lender unless you happen to have shared a financial connection with them. Lenders are only interested in your ability to cope with your borrowings.
2. Family and friends living in your home can damage your chances
They can't harm your credit rating unless you share a financial connection, such as a joint account, with them. In that case, they become your financial associates and lenders may look at their credit history when deciding whether or not to make you an offer, because their circumstances could affect your ability to repay what you owe.
3. Decisions are made by credit reference agencies
They don't give you a credit rating or decide whether or not you should get a loan; the lenders do these things. Credit reference agencies simply collate the information in your credit report, hold it securely and give access to registered and approved organisations, such as banks, building societies and finance companies.
4. You're on a credit blacklist
There's no such thing. Red-lining (ruling out whole streets or estates) simply doesn't take place and your credit score does not take account of factors such as gender, religion, race or ethnic origin.
5. You used to have a bad credit rating
One bad credit score isn't a life sentence!
Your credit rating changes over time, as your circumstances alter, so if you got a bad score a few years ago it could, with better management of your finances, now be a good one. On top of that, every lender calculates your credit rating differently and some adjust their formulae for different products, so you could be given several different scores within the same week.
Your credit report is a key element of your financial CV and records credit you've taken out, such as
loans,
credit cards and
mortgages, your repayment history and other relevant information (for example, whether you've been bankrupt.)
Before you apply for credit, you should get your credit report to make sure it is accurate, up-to-date and correctly reflects your current circumstances. There may be things that you can do to increase your chances of getting the great deal that you want.
You can see your Experian credit report and get advice on what you can do for free with a 30-day trial of CreditExpert, the UK's leading online credit monitoring and identity fraud protection service.
Source: © Credit Expert/Experian 2008
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