Too many borrowers in the UK are in the dark about their credit worthiness. When making a big purchase like a new home or automobile, it’s just human nature to be more concerned about what you’re buying rather than how you’re buying it. The exciting features of that new car or the number of bedrooms that new home has are just much more important to buyers than something as dry and boring as the details of credit scores and how they affect a loan. The problem is, if your credit score is the last thing on your mind, you stand to lose a lot of money.
What does my credit score mean?
Your credit score is a number that reflects your credit history. Lenders look at this number and examine the history reflected in your credit report in order to determine four things:
- Whether to extend a line of credit to you.
- How much credit to approve.
- The interest rate and repayment schedule.
- Additional fees and, if applicable, insurance.
Of course, if your credit is so bad that the answer to number one is a resounding “no,” two through four are moot. If you do qualify for credit, your credit score determines all the terms of the loan. Stellar credit means you will get a much higher credit line with a lower interest rate and minimal fees, if any. On the flip side of this, borrowers with bad credit are determined to be a credit risk, and lenders will mitigate this risk by grant a lower line of credit, a higher interest rate and increased fees and possible loan insurance, such as mortgage insurance. What your credit score means to you is how much buying power you have and what kind of loan you can get. This directly affects the cost of the loan.
What is in my credit report?
Your entire credit history and any accounts you currently have open are listed in your credit report. This includes mortgages for homes, car loans, credit cards, personal credit agreements from banks and more. These lenders all report your balance information and payment habits. This is a very important part. Future lenders will want to know from past and current lenders whether you can pay loans on time and whether you only pay the minimum or if you can pay more. Your past history is only part of the reason banks want to see your credit report. Lenders also want to know if you are spread too thin with current loans or if you have room for more.
Your credit report also lists several negative issues, including loan defaults, bankruptcy agreements, late payments, voluntary arrangements and more. These blemishes actively harm your credit score, making it very difficult to obtain favorable credit terms, if you’re able to get credit at all.
Finally, your credit report contains personal data that is obtained from lenders and election rolls. This includes your name and other names you’ve possibly used, current and past addresses and other contact information.
Regarding payment details, keep in mind this is entirely voluntary on the part of lenders. Lenders are not required to supply full details. Some might only list defaults or late payments, not full information on payment habits. This aspect of credit reporting is entirely p to the lender.
What is not in my credit report?
Borrowers do have a right to privacy in many matters. As such, there are many things not reflected in credit reports. A borrower’s employment history is not listed in a credit report, though savvy lenders may be able to determine some employment data if past employers made credit inquiries, which ARE listed. Information about salary history and pension is not listed in a credit report, nor is information about child support payments, student loans and property ownership status.
Who are the major credit reporting agencies in the UK and how do I contact them?
The UK has three main credit reporting agencies that receive borrower data from lenders, courts and other sources, then compile this data into credit reports and supply it to future prospective lenders and to borrowers themselves. They are Equifax, Experian and CallCredit. They can be reached by telephone, email or in writing. Disputes can be files and inquiries can now be made right online.
