“When it comes to credit, the G knows the score. Knowing and improving your credit rating has the power to dispel darkness. If your score is less than saintly, let the Guru offer you some self-help.”
A person’s credit report is a record of information compiled from a number of sources which include governments, credit agencies, banks and collection companies. A credit score is then calculated by a mathematical algorithm to determine an individual’s future ability to meet the borrowing and repayment terms of potential borrowing.
When you apply for different types of credit such as loans, mortgages or finance packages for
Vehicles, most lenders will look at your credit report and score to judge if you’re a trustworthy person to loan money to, who is able to financially commit to the agreement. The amount and type of information available for lenders to see will depend on what’s publicly available, such as if you’re registered to vote and if you have any court convictions.
The reason electoral roll information is used and considered relevant by lenders is that it shows you’re settled, and it’s used to check your name and address against the details you’ve provided.
If you have IVAs, bankruptcy or county court judgments, this would indicate a history of debt problems. If you’ve been taken to court by a debt collection agency, this will also show up.
Past credit searches from other companies show up on your record too. This is especially relevant when applying for loans or finance. If a lender sees you’ve made a number of applications in the space of a few days, it would suggest the customer has been turned down several times and might not be a trustworthy borrower.
General bank account information is also shared, so your account behavior and usage is also monitored. This includes activity in an overdraft, whether it’s arranged or not, and would indicate that perhaps money management may be an issue.
By using all of the above factors as indicators, companies will assign you a credit score.
Credit scores continually improve and reduce based on both successful and missed repayments on credit cards, loans and borrowing.
Having a poor credit score could prevent you from being accepted for a loan and could result in the lender declining your application. Even if you do get accepted for credit, it’s likely you’ll have to pay higher interest rates. This is due to the lender taking a bigger risk in lending you the money compared to someone with a good credit score.
If a customer has a bad credit score, they may find more ordinary sources of credit, such as mobile phone contracts, harder to obtain.
The same goes for utility companies; if a provider doesn’t see you as a ‘fit person’ credit-wise, you’ll be asked to pay a security deposit in order to secure the use of their services.
Landlords or estate agents will often make credit checks on people when they’re applying for a tenancy. It’s important for them to make sure you’ll be able to pay the rent on the house once you’ve moved in.
No. Smart Search sets you up with the cheapest lender available to you, giving you a better chance of being accepted. MoneyGuru’s comparison tables provide you with the option of looking through lenders who are more likely to accept an applicant with bad credit.
As always, MoneyGuru suggests you visit a debt help company if you’re struggling with debt. Here are our suggestions for help: