What is a credit rating?
Any reputable company to whom you apply for a loan (or mortgage) wants to know what sort of person you are - specifically, whether you're the sort of person that'll pay their money back to them. If a friend asked you for money, you'd probably consider something similar - do they already owe you money? have they paid any debts back in the past? are they likely to be able to pay you back?
Well, a credit rating is a sort of numerical value attached to you indicating your trustworthiness to receive your loan and lenders always take a look at it before advancing you any money. What affects my credit rating?
Credit ratings are computed from your credit record, which is held by credit reference agencies, who keep a record of your financial history. A credit record includes information about how you have handled credit in the past and how much debt you have. Most of the information about your credit is only kept by agencies for about six years, although bankruptcy filings, among other major items, are kept for longer.
The most significant factor affecting a credit rating is missed repayments - if you look at it from the point of view of a potential creditor, you missing repayments means you're much less likely to pay them back. The other really important factor is to make sure you're registered on the local electoral roll. Any credit check will include checking you live where you say you do, and this is performed by looking up your name on the electoral roll. Surely, you can't expect someone to give you money if they think you've lied about your address!
Other relevant unhelpful factors on your credit report include CCJ's (County Court Judgements), which are court cases in which an individual is taken to court for the recovery of a sum of money; associations with someone with a bad credit rating (you need to be financially connected with a shared account) and a history of many credit searches. You can avoid the last by only applying for credit when you're certain you should qualify and, if declined credit, taking steps to sort out the problem before reapplying.
How can I see my credit report?
The two major credit checking agencies are Experian and Equifax. You can apply to see your credit report via either of them - Experian charge £2 if you sign up to their online service and Equifax charge £12.50, although you can also sign up to their Credit Watch, which costs £7.99 per month and notifies you within 24 hours whenever your report changes.
Once you have your credit report, you can request alterations to it if there is incorrect information. Note that a record of a credit check made by a prospective lender will only be removed on that lender's decision, and you need to apply directly to them.
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