Understanding your Credit Rating
Joseph Kenny asked:
Your credit rating is important. It may determine whether you can get a car loan or a mortgage. But do you understand the elements that decide whether your credit request is approved or denied? Here’s what you need to know about your credit rating.
What Is A Credit Rating?
When people apply for loans, credit cards, store cards or mortgages) they are scored according to factors in their application and their credit history. This effectively makes up their credit rating and determines whether lenders think they are a good risk.
The credit history looks at areas such as: – Whether people have recently applied for credit – How long they have had credit – What type of credit they have had (such as different types of loans, credit cards or a mortgage) – How much money they owe in total – What their payment history is.
Lenders are particularly concerned with whether people have paid the specified repayments on time. Although one or two late payments may not unduly affect a person’s credit rating, regular late payments will raise question marks for lenders.
Looking Into Your Financial History
Lenders are also concerned about other aspects of people’s financial history. For example, lenders will want to know: – Whether people have had any County Court Judgements (CCJs) against them – Whether they have ever been made bankrupt – Whether they have ever defaulted on a loan or credit card – Whether they are in arrears on existing loans or credit – How many credit applications they have made recently – Whether they have been turned down for credit in the past
Much of this information is held in reports compiled by credit reference agencies. Equifax and Experian are the largest and best known credit reference agencies in the UK. People can find out what information is held about them by paying a small fee and requesting a copy of their credit report.
Other criteria that affect approval for credit are on lenders’ individual application forms. These might include whether people own or rent their homes and whether people are employed (full-time or part-time), self-employed or unemployed. Lenders also look into existing salary and outstanding credit.
How To Get Credit With A Poor Rating
Although having a poor credit rating can make it difficult to get credit, this does not mean it is impossible. Options for getting credit include: – Loans which are secured on the value of the property owned by the applicant – A higher interest credit card, with an interest rate that reduces once the holder shows a good payment history – Prepaid credit card, which works like a mobile phone top up card
Some people have a poor credit rating even when they have no CCJs or arrears on their credit report. This might apply to self-employed people (such as taxi drivers, market traders, hairdressers and other small business people). These people have similar options for getting credit. And they don’t have to live on the streets, either. There are self-certification mortgages to enable self-employed people to buy houses.
Your credit rating is important. It may determine whether you can get a car loan or a mortgage. But do you understand the elements that decide whether your credit request is approved or denied? Here’s what you need to know about your credit rating.
What Is A Credit Rating?
When people apply for loans, credit cards, store cards or mortgages) they are scored according to factors in their application and their credit history. This effectively makes up their credit rating and determines whether lenders think they are a good risk.
The credit history looks at areas such as: – Whether people have recently applied for credit – How long they have had credit – What type of credit they have had (such as different types of loans, credit cards or a mortgage) – How much money they owe in total – What their payment history is.
Lenders are particularly concerned with whether people have paid the specified repayments on time. Although one or two late payments may not unduly affect a person’s credit rating, regular late payments will raise question marks for lenders.
Looking Into Your Financial History
Lenders are also concerned about other aspects of people’s financial history. For example, lenders will want to know: – Whether people have had any County Court Judgements (CCJs) against them – Whether they have ever been made bankrupt – Whether they have ever defaulted on a loan or credit card – Whether they are in arrears on existing loans or credit – How many credit applications they have made recently – Whether they have been turned down for credit in the past
Much of this information is held in reports compiled by credit reference agencies. Equifax and Experian are the largest and best known credit reference agencies in the UK. People can find out what information is held about them by paying a small fee and requesting a copy of their credit report.
Other criteria that affect approval for credit are on lenders’ individual application forms. These might include whether people own or rent their homes and whether people are employed (full-time or part-time), self-employed or unemployed. Lenders also look into existing salary and outstanding credit.
How To Get Credit With A Poor Rating
Although having a poor credit rating can make it difficult to get credit, this does not mean it is impossible. Options for getting credit include: – Loans which are secured on the value of the property owned by the applicant – A higher interest credit card, with an interest rate that reduces once the holder shows a good payment history – Prepaid credit card, which works like a mobile phone top up card
Some people have a poor credit rating even when they have no CCJs or arrears on their credit report. This might apply to self-employed people (such as taxi drivers, market traders, hairdressers and other small business people). These people have similar options for getting credit. And they don’t have to live on the streets, either. There are self-certification mortgages to enable self-employed people to buy houses.
Categories: Finance Tags: Credit History, Experian, Financial Lenders
How to Check Your Credit Rating And How It Affects You
Darren Yates asked:
Did you know that each time you take up any kind of credit or loan, or pay one back, it adds to your credit rating. Who keeps a record on you will vary according to where you live, but the three major credit reference agencies are Equifax, Experian and Trans Union. They will supply your credit rating to any business that is considering lending to you.
What Does Your Credit Rating Reveal.
All your current debts are incorporated in to your credit rating. Believe it or not there is a history of all the debts you’ve had in the past ten years or so, and special note is made of anything that has gone wrong. A Default (missing a payment) on any debt can damage your credit rating. Borrowing a lot before you start paying anything back will make you seem like a very bad risk, as will going all the way up to (or even over) your limit on a credit card.
It’s also worth bearing in mind that the credit reports of anyone you live with may be linked to your own report, and in turn could reflect badly on you – your partner’s credit rating is coupled to your own quite intimately.
How Your Credit Rating is Worked Out.
‘FICO’, named after the Fair Isaac Corporation, who invented it, is the most common method of coming up with your rating. Your present credit status is prioritised thus:
1: Whether you’ve paid previous debts
2: How much debt you now have
3: Your credit history
4: What types of debt you use
5: How many times your credit rating has been checked of late
Things that happened in recent times are given more weight than things that happened a while ago.
Your Credit Rating is Significant.
Each time you get declined for a credit card or any other type of loan, the odds are that it was because of your credit rating. Companies handing over small loans are far more probable to rely entirely on this rating than to bother checking your income, and a poorer rating will mean that you are offered a higher interest rate.
Your rating is important when you get mortgages, loans or car finance too. You wouldn’t want to find a house you love only to get declined a mortgage thanks to your habit of paying your credit card bills late.
How Do You Check Your Credit Rating.
Credit reference agencies are not allowed to hold your information on file without disclosing what it is they have. If you write them a letter and pay a small fee, they must send you the full credit report they hold on you.
You can then look over your credit rating and contact them if you discover something that is incorrect. You might find an error has made you look bad or there is a mistake. They store anything you report in your file.
It is possible in some countries to sign up and get credit reports frequently for a small fee, or even free!
Check your local laws to see if this is possible.
Did you know that each time you take up any kind of credit or loan, or pay one back, it adds to your credit rating. Who keeps a record on you will vary according to where you live, but the three major credit reference agencies are Equifax, Experian and Trans Union. They will supply your credit rating to any business that is considering lending to you.
What Does Your Credit Rating Reveal.
All your current debts are incorporated in to your credit rating. Believe it or not there is a history of all the debts you’ve had in the past ten years or so, and special note is made of anything that has gone wrong. A Default (missing a payment) on any debt can damage your credit rating. Borrowing a lot before you start paying anything back will make you seem like a very bad risk, as will going all the way up to (or even over) your limit on a credit card.
It’s also worth bearing in mind that the credit reports of anyone you live with may be linked to your own report, and in turn could reflect badly on you – your partner’s credit rating is coupled to your own quite intimately.
How Your Credit Rating is Worked Out.
‘FICO’, named after the Fair Isaac Corporation, who invented it, is the most common method of coming up with your rating. Your present credit status is prioritised thus:
1: Whether you’ve paid previous debts
2: How much debt you now have
3: Your credit history
4: What types of debt you use
5: How many times your credit rating has been checked of late
Things that happened in recent times are given more weight than things that happened a while ago.
Your Credit Rating is Significant.
Each time you get declined for a credit card or any other type of loan, the odds are that it was because of your credit rating. Companies handing over small loans are far more probable to rely entirely on this rating than to bother checking your income, and a poorer rating will mean that you are offered a higher interest rate.
Your rating is important when you get mortgages, loans or car finance too. You wouldn’t want to find a house you love only to get declined a mortgage thanks to your habit of paying your credit card bills late.
How Do You Check Your Credit Rating.
Credit reference agencies are not allowed to hold your information on file without disclosing what it is they have. If you write them a letter and pay a small fee, they must send you the full credit report they hold on you.
You can then look over your credit rating and contact them if you discover something that is incorrect. You might find an error has made you look bad or there is a mistake. They store anything you report in your file.
It is possible in some countries to sign up and get credit reports frequently for a small fee, or even free!
Check your local laws to see if this is possible.
Categories: Debt Consolidation Tags: Bearing, Experian, Partner
A Bad Credit Rating? What to Do About It
Molly Wider asked:
that many individuals with bad credit have in common is that they do nothing about it. They accept that they have bad credit and live with the consequences. Many don’t realize that it is actually not that difficult to fix a credit score. It does take patience as it can take a year, or many years depending on how bad your score is, but it is possible. The key is taking action and being consistent. The following are steps that you can take to improve your credit rating.
- Request your credit report. In Canada this means contacting Equifax Canada and TransUnion Canada. In the US this means contacting Experian, TransUnion, and Equifax. Many people are unaware that a poor credit rating could be due to clerical errors. Typos and duplicate entries on a credit report are not uncommon. Once you have your reports, review them closely to ensure that there are no errors. If there are errors, dispute the charges with the reporting agency and you could be back to an acceptable credit rating sooner than you think.
If you have established that your credit report is accurate, and would like to improve it, the following should be your next steps:
- Pay all of your bills on time. If you can’t pay the bills on time, call the company(s) you will be late in paying and let them know when you will be paying. Some companies will note these calls in your customer file and it may prevent them from reporting a non-payment. This will not always work, but it’s worth a try.
- Don’t cut up your credit cards. Many think that if they don’t use credit for a while their score will be fixed and this is not the case. You must use credit to gain credit. Reduce the amount of available credit on each card and reduce the number of cards you carry. Don’t just cut up a card, but call to have the account closed. Call or write to your credit card companies and ask them to reduce your interest rate. Paying a yearly fee for a lower interest rate on a card on which you carry a balance may be well worth it in the end. Again, if at all possible, be sure to pay your bills on time.
- If you have no cards, try to obtain a secured loan, or a secured credit card to re-establish your credit. Asking a friend or family member to co-sign on a loan or credit card is another method, but beware, if you don’t pay this debt, you may lose a lot more than a good credit score, so this should be a last resort.
Fixing your credit score is not impossible, but it does take patience, persistence and commitment. Following these steps should help you to improve your credit rating.
that many individuals with bad credit have in common is that they do nothing about it. They accept that they have bad credit and live with the consequences. Many don’t realize that it is actually not that difficult to fix a credit score. It does take patience as it can take a year, or many years depending on how bad your score is, but it is possible. The key is taking action and being consistent. The following are steps that you can take to improve your credit rating.
- Request your credit report. In Canada this means contacting Equifax Canada and TransUnion Canada. In the US this means contacting Experian, TransUnion, and Equifax. Many people are unaware that a poor credit rating could be due to clerical errors. Typos and duplicate entries on a credit report are not uncommon. Once you have your reports, review them closely to ensure that there are no errors. If there are errors, dispute the charges with the reporting agency and you could be back to an acceptable credit rating sooner than you think.
If you have established that your credit report is accurate, and would like to improve it, the following should be your next steps:
- Pay all of your bills on time. If you can’t pay the bills on time, call the company(s) you will be late in paying and let them know when you will be paying. Some companies will note these calls in your customer file and it may prevent them from reporting a non-payment. This will not always work, but it’s worth a try.
- Don’t cut up your credit cards. Many think that if they don’t use credit for a while their score will be fixed and this is not the case. You must use credit to gain credit. Reduce the amount of available credit on each card and reduce the number of cards you carry. Don’t just cut up a card, but call to have the account closed. Call or write to your credit card companies and ask them to reduce your interest rate. Paying a yearly fee for a lower interest rate on a card on which you carry a balance may be well worth it in the end. Again, if at all possible, be sure to pay your bills on time.
- If you have no cards, try to obtain a secured loan, or a secured credit card to re-establish your credit. Asking a friend or family member to co-sign on a loan or credit card is another method, but beware, if you don’t pay this debt, you may lose a lot more than a good credit score, so this should be a last resort.
Fixing your credit score is not impossible, but it does take patience, persistence and commitment. Following these steps should help you to improve your credit rating.
Categories: Finance Tags: Credit Card Companies, Credit Score, Experian