Credit report management
Tips on managing your credit report
A credit report in basic terms is something that rates your creditworthiness. Credit reports are generally used by people who want to take out a loan, such as a mortgage, car loan or personal loan, or get a credit card. The lending institutions, whether it’s a bank, building society or credit card company, will look at your credit report to see what your credit history is like before they decide whether or not to lend you any money or issue a credit card to you.
What does a credit report cover?
There are many types of credit reports; some more detailed than others. In fact, it always makes sense to know what your credit report looks like before deciding whether or not to make a large purchase, such as a home. This is because your creditworthiness will determine not only whether you can obtain a loan, it will also influence the cost of your loan. If you have a good credit rating, the bank will be willing to lend you money and offer you more competitive rates because you are considered to be less of a risk.
In the UK, credit reference agencies provide credit reports to banks and financial institutions. Under UK law, these agencies must provide consumers with a credit report under the Data Protection Act. For a small fee, anyone can get hold of a copy of their basic credit report. The will cover details such as date of birth, earnings and residential addresses for the last six years.
A more detailed report will show earnings, loans, court judgments, bankruptcies, house repossessions and any defaults on loans. Such a report can be obtained for a price from agencies. In this day and age where there is a lot of fraud, it makes sense to get your credit report and make sure it is accurate. If it isn’t accurate, make sure you contact the Financial Services Authority Consumer Help centre.
Who uses a credit report?
Credit reports are used by banks and financial institutions to asses a potential borrower. This will happen if you apply for a mortgage, a personal loan, a credit card or a car loan. Most banks will do their own due diligence but will start out by getting a borrower’s credit report. They will use this report to assess borrowers and create a credit score.
If you are borrowing from your own bank or financial institution, they will use the history you have with the bank as part of the credit rating. They will look at income deposited in the account, withdrawals, bounced checks and overdrafts. The bank will also look at repayments of old loans to see if you were ever delinquent.
The bank will also take a look at your income and your expenses. All these factors are used to create the credit rating. According to the level of your score, you will be accepted or denied a loan.