Credit Scores Explained
Why should you check your credit history?
Any time that you take out credit, it’ll show up on your credit history. Lenders look at your credit history in order to make decisions about whether or not to lend to you.
Each lender will balance up the opportunity to make a profit with responsibility. The whole point of a loan is that the lender makes more money than they gave out in the first place. What they are looking for will depend on how they are looking to deal with you. They will then usually score you based on your credit record and application information. Each lender will have different criteria that they score by.
For some lenders, this will be best done by establishing a long-term relationship with you. After all, a lot of people stay with the same bank or credit card and use them for everything.
Other lenders won’t be looking for that long-term relationship and will instead be looking to make a profit on your loan on a more immediate basis. As a result, they may be more interested if you’ve actually got poorer credit, as you may not have better options.
Whatever the kind of loan you’re looking for, or the kind of lender, it’s always worth checking out your credit record. This is because you’re always going to be in a better situation if you have a stronger idea what the lender’s answer is going to be before you apply.
Your credit history is the tool that most lenders use to make decisions about you. It only makes sense that you should already know what information you’re submitting to them. Not least because being turned down for some applications can actually cause your credit score to go down.
By knowing your credit history in advance you could increase your chances of being approved for credit. Knowing what lenders look for helps. You can also increase your chances of being approved at better rates than you may otherwise be.
Also, if you don’t know what’s on your credit history, you don’t know if there may be something on there that’s causing problems and that you could easily fix.
What shows up in your credit history?
You can view your credit history by going to a credit reporter, such as Experian, Equifax or Call Credit. These sites will generally need a subscription in order to use them, although they also often run free introductions if you sign-up. You’ll usually be automatically subscribed once the offer period is finished. So, do check the terms and conditions before you sign up to anything.
If you sign up to one of these, you’ll usually be shown a credit score. This shows what the credit reporter thinks that your score will be. This does not mean that each prospective lender will score the same way, nor that they will be looking for the same kind of customer.
It’s important to check all of these areas on your full credit report, as any mistakes could lead to problems with your credit history.
This information will show your name, age, address and your last two addresses along with how long you have lived there. It’s very important to make sure that this information is correct, as this could be a major issue if not.
This will show a summary of your various accounts. This will most typically include bank accounts, mortgages and mobile phone contracts. It will usually show the last 12 months of your balances of these accounts. It will also show whether your performance on the accounts is deemed to be satisfactory or not.
If you have missed any payments, these will show up here as well. If you owe a debt to another company (for example, a utility company), these may show up here as well. Missed payments and accounts that are deemed unsatisfactory can drive your credit score down very quickly.
This will show the addresses that you were linked to on the electoral roll. If you aren’t on the electoral roll, that’s usually an easy way to help your credit score. Also, obviously, if you aren’t on the electoral roll, you can’t vote. So that’s two good reasons.
Some people think that your address can be blacklisted, due to previous tenants. This is actually not the case – first of all, there’s no such thing as a credit blacklist, and secondly, you’ll only be linked to them if there is a financial link. Your credit rating is about you, not your housemates.
If you’re officially known under any other names, these will show up here. This may include professional names if you’re a performer. Mistakes can occur here. For example, one member of staff here at Pete’s Loan Machine found out that they had an alias registered due to a mistake someone had made on a form somewhere. As a result they had a registered alias as Mr Non-Applicable!
This will show the details of anyone you are financially associated to. Usually, this will be a spouse/partner or housemate. Business partners do not show up. If someone shows up and you don’t know who they are, you should query that immediately. In some cases, your finances may be linked with that person, and so any issues on their report could influence yours (and vice versa).
Public Record Information
This will show any information with regards to your finances that is held in the public record. Examples of this could include:
- County court judgements
- Debt relief orders
- Individual voluntary arrangements
These can usually cause your credit score to drop significantly. If you have something registered that you don’t know about, it’s definitely worth looking into.
This section shows information about queries into your credit report that have been made in the last 12 months. These will usually coincide with applications for credit. Some of these will show up to lenders, but not all – Quotation searches, identity verification checks and similar will show up to you, but will not show up to lenders. Also, you will be able to see times when you’ve checked your own report.
Financial Associate Searches
This section shows if your credit record has been checked because of someone you are linked to. It will show who made the check along with the person you are linked to. As with the Financial Associations, if someone shows up here that you don’t recognise, you will almost certainly want to look into that.
Credit Industry Fraud Avoidance Service – it’s basically a record of any fraudulent activity that has taken place. This will usually be empty. If it isn’t (and you were expecting it to be), contact CIFAS for more information.
GAIN is the ‘Gone Away Information Network’. Basically, this shows if there is a record for someone who has owed money and moved address without updating the person who is owed the money. This is usually taken fairly seriously, so it’s important to make sure you update any companies you owe money to (especially if it’s a significant amount), or they may think you’ve ‘done a runner’.