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Contact us | www.future-financial.co.uk | E-mail your comments | Archive | |
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Credit ratings and you … With banks apparently reluctant to lend to anyone at all despite the fact that some are in public ownership knowing how to look after your credit rating is increasingly important.
Actually, we are told that there is no such thing as a credit rating; simply the data from which individual lenders can gather information and create their own credit score for each applicant or enquirer. This is important because every time you seek a loan of any sort even if you are only shopping around for the best deal you leave a ‘footprint’ in the records. In theory this would not matter, but it actually makes potential lenders nervous, as they think that anyone shopping around is desperate for money and must be a poor risk. One option is to ask potential lenders to make it clear that this is a “search for quotation purposes only”. The alternative is to use a mortgage broker, as these will know which lenders to approach, saving you time, effort and the risk of inadvertently adversely affecting your credit record. Sources of information There are three main credit rating agencies that lenders tend to use: Equifax, Experian and Callcredit. However, lenders also use a variety of other sources of information including the electoral roll and court records looking for adverse judgements and so on. Some of the larger lenders also share data about credit card debts, repayment histories and overdraft records with each other, to help identify ‘poor’ risks. They are allowed to do so thanks to a demand from the government that they should lend responsibly. What you should do … Apart from avoiding shopping around, there are a number of ways to ensure that you make your credit score as positive as possible: > Make sure you are on the electoral roll lenders check; > Keep your existing borrowing under control try never to miss a payment unless you have first discussed this with the lender; > Have a landline for your telephone this gives a better impression of permanence than a mobile. Another issue that you need to be aware of is that if a lender rejects an application based on incorrect information, you should challenge them and get it corrected. Simply walking away and trying an alternative lender will leave their rejection on record and produce a downward spiral of rejection. You should also be careful not to make a joint application for credit with anyone who may have an adverse credit history, because this will instantly affect yours. If you are married to someone with a poor credit history, this should not be a problem in itself; but applying for a joint mortgage could well tarnish your own record. Don’t be afraid to ask Anyone can send £2 to a credit rating agency and ask to see their record. In fact this can now usually be accomplished on line and Experian (http://www.experian.co.uk/) will give you a free credit rating, although you will have to give your credit card details to get it, so it is important to cancel the subscription, if you do not want a monthly deduction from your account after the free 30 days. Key Points: > Credit ratings are valuable commodities > You can take steps to protect yours > Make sure you know where you stand |
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©futurefinancial This publication represents our understanding of law and Inland Revenue practice as at the date of publication. It does not provide individual tailored investment advice and is for guidance only. Rules may vary for Scotland and Northern Ireland. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. The value of land and buildings is generally a matter of a valuer’s opinion rather than fact. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Your home may be repossessed if you do not keep up repayments on your mortgage. Loans are subject to status and written details are available on request. Always seek independent advice from a qualified financial adviser. Think carefully before securing other debts against your home. Fees for mortgage advice maybe charged and for details of these please contact us. The Financial Services Authority does not regulate all the activities undertaken by the company, including taxation advice and overseas mortgages. |
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