What is a credit check?
When applying for a loan or credit you are advised a credit check will be carried out. What does that mean?
A credit check is used to ascertain how reliable you are in meeting your financial commitments. The check will show:
- Whether you have ever defaulted on a borrowing (i.e. failed to repay the debt),
- Whether you are making late payments, incurring additional charges for failing to pay the due amount on time.
- Experiencing financial problems such as increasing debt
- Any Country Court Judgements
- Who you have approached to obtain credit and when
- Anyone you are connected to financially, such as a partner
On the positive side it will show:
- You make payments on time
- Your debt is reducing or has been repaid
- Credit card balances paid monthly
- Any repaid borrowing
The credit check will show your financial history, such as:
- Companies who have carried out a credit check on you
- Any previous addresses
- How long you have lived at your current address
- The amounts you have borrowed
- Credit card and store company limits and balances outstanding
- The activity on each account
As well as:
- Whether you are on the electoral role
- Your date of birth
- Whether you have been involved in any fraud
- Whether you have moved without informing the companies you owe money to.
A company will carry out a credit check simply because they want to know you are the kind of person they want to do business with. They are not going to be inclined to lend money or take a risk on you meeting your financial commitments without taking additional security if your credit report shows you have a history of defaulting or being late in paying your bills, such as a mobile phone.
Every credit check carried out is recorded on your credit file with a date when the enquiry was made. Therefore be aware too many at one time will affect your credit rating.
You can check your own credit report without leaving “footprint” on your file. The sites where you can check are:
Equifax
http://www.equifax.co.uk/Products/credit/credit-report.html
CreditExpert from Experian
http://www.creditexpert.co.uk/
Checkmyfile
You can either sign up for a free report then a monthly report at a cost using your credit or debit card (you can cancel at any time). Or you can write to them and send a cheque for the statutory fee of £2.00.
It is important you check your credit report as an incorrect report can and will have an impact on your ability to obtain credit or have any kind of agreement with a mobile phone company or such like. You can have any incorrect information amended or a note recorded against it.
You can also check your credit score, this is what lenders use to determines at what rate they are going to lend you money, the higher the score the lower the interest rate you are likely to be offered, the lower the score the higher the interest rate will be. You can check your score at the above sites By being aware what is on your report can mean the difference between obtaining credit, being offered a higher interest rate or even being refused altogether.
