Lenders are making life difficult for those who wish to obtain credit and even those who think they have a perfect history are finding themselves being turned away for products they would have been a shoe-in for a couple of years ago.
It's therefore well worth obtaining a copy of your credit file before you apply for a mortgage, loan or credit card and you can apply for yours through moneysupermarket.com's new
credit checking channel.
But what should you look for when you've got your credit file? What exactly is a good credit history? And what do providers look out for when deciding whether or not you are worthy of their credit?
Read on to find out.
What do lenders look for?
Mortgage, loan and credit card providers have a 'score' card which they use to evaluate credit applications. They give or take away points from you depending on the information that is on your credit file. Each lender's score card is different although the main factors they look out for, and will reward you points on, is your current credit conduct, whether or not you appear on the Electoral Roll and how long you have been in continuous employment.
What information is held about you?
When you receive your credit file, the following information will appear on it:
Electoral Roll information - the date your name was entered onto the electoral register at your current address shows here, it will also show the dates that you were on the Electoral Roll at previous addresses. Lenders will use this information as proof that you live where you say you live.
Financial associates and aliases - you will find here any names that you have previously been known as and also anyone that you are tied to financially. For example, if you hold a joint bank account with a partner, then this information will appear as well as basic details of the other person's whose name the account is in.
Public record information - here you will find details of any County Court Judgements (CCJs), Involuntary Arrangements (IVAs) and bankruptcies. It will show the date that the information was registered and, if applicable, when the arrangement or CCJ was satisfied, in the case of a bankruptcy, it will show when this was discharged.
Credit account information - this is the all important part of your credit file. It shows how you manage any existing credit arrangements you have whether it is a credit card, current account, mobile phone or shopping catalogue.
It will show the date you took out the credit arrangement, your credit limit and your current balance. It also shows the conduct of your agreement over a period of at least12 months in the form of numbers.
Payments that have been made in full and on time will appear as a 0. If you have missed any payments this will show as a number, for example if you have missed one payment this will appear as a one if you have missed two consecutive payments this will show as a two and so on.
Another symbol that may appear is a U, this is where your credit provider hasn't updated their details with the credit referencing agency. If you have a U on your file, it's worth contacting your provider to let them know that the information needs to be updated and to also send you confirmation that a payment was received in that month.
Council of Mortgage Lenders (CML) information - if you have ever had a repossession order it will appear in this section. It will show the date the order was effective from and also the lender that you held your mortgage account with.
Previous searches - This shows the names of the organisations that have carried out searches on you in the last year. You should look at this carefully as the more searches that are carried out can have a detrimental effect on your credit file.
It will not show if you were accepted or declined, however, if a lender is looking at your credit file in detail, they will be able to decipher which agreements you were accepted for and the ones that you weren't.
Linked addresses - any previous address details will appear here. Although your credit history at a previous address doesn't show in this section, a lender may choose to carry out a further search on these addresses to check your financial conduct further. How long does this information stay on your file for?
Missed payments tend to stay on your credit file for a year. More serious entries such as defaults, CCJ's and bankruptcies stay around for much longer, usually six years. Searches carried out by other institutions stay on your file for around six months.
What if there is incorrect information on your file?
In some instances there may be discrepancies on your credit file and in extreme cases this could be down to someone applying for credit in your name, so going through your credit file with a fine tooth comb every six months is advisable.
If you do come across information that you feel is incorrect or inaccurate, get in touch with one of the credit reference agencies such as Experian or Equifax. They can look into this in further detail and amend the information if it's proven to be incorrect.
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