Copy On Credit Ratings By Donald McNaught

Category: Finance, Credit.

Copy on credit ratings by Donald McNaught.

Supplied on behalf of Invocas Group plc by The BIG Partnership. Donald McNaught is a director of Invocas Business& Recovery Limited, which operates consumer debt solutions arm Newtomorrow. For more information contact Stuart Forsyth or Bryan Garvie on 0141 333 9585 or stuart. forsyth@ bigpartnership. co. uk/ bryan. garvie@ bigpartnership. co. uk. But what information does this record contain and how does it affect the way in which lenders assess how risky a borrower you are? When you apply for a loan, the amount of money you can borrow and, whether you can, indeed borrow at all, is determined by lenders through examining a record of your credit history and ability to service the borrowings from current income. Knowing what s in your credit history is key to understanding how to improve it because even the financially well- off can have unattractive credit ratings that put off prospective lenders.

The record contains your address, any court judgments, previous addresses or bankruptcies against you and a record of your payments to previous or current creditors. There are three main agencies in the UK that compile credit histories- Equifax, Experian and CallCredit. If you have been refused credit and you want to know why, the first thing you should do is obtain a copy of your credit history by writing to one of the agencies, whose details you can find online, with a �2 payment. If you fail to repay loans, or miss several repayments, then lenders fear they will not get their money back. The most obvious reason why lenders may refuse you credit is that your past payment performance has been less than satisfactory. The way to address this is by ensuring you don t miss any repayments, and the simplest way to ensure no payments are missed is to set up a direct debit which will automatically allow the lender to transfer repayments from your bank. This will make you less attractive to credit card lenders.

With credit card lenders however, whilst making timely repayments is looked on favourably, clearing the full balance each month is not- because the card companies don t make any money from charging interest on your borrowings. As far as they are concerned they could have kept the money you have used in the bank and earned interest that way. If you apply for credit from a number of sources in a short space of time, it can indicate a troubled financial picture, while not enough applications may indicate that you don t really require credit and therefore will not incur interest, thus limiting the profit for the lender. Other factors which affect credit ratings include the number of applications for credit you have made. Your traceability is also important. Likewise, being in employment or owning your own home and having lived there for several years, as well as having stayed with the same bank for a long time, makes you more attractive to lenders. Understandably, lenders prefer to give money to people they can find- so if you are not on the electoral roll, registering on this will help, as will obtaining a home telephone number if you do not already have one.

Other negative impacts on credit ratings include bankruptcy or court judgements against you. The lesson is to recognise how much credit you can afford to obtain and repay- as well as looking for the most attractive interest and repayment rates. While careless management of credit facilities can lead you to serious debt problems, being unable to access credit, or only being offered the worst interest or repayment rates, could be equally damaging. If you find yourself in financial difficulties speaking to a debt solution Company as early as possible is always a good idea.

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