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Checking your credit rating online: How it works

The credit 'score' system is used by lenders to predict your likely borrowing behaviour. Contrary to what many people think, a universal credit rating system does not exist. Each credit lender scores you based on a comparison with its ideal, perfect customer. Credit scores, therefore, differ from lender-to-lender and from product-to-product. No uniform published record of scores exists. So, just because a creditor rejects your application does not mean another creditor will also reject you.

How it works

In the UK, lenders use a mix of criteria to give you a score, including your past dealings with the lender and your statutory credit files kept by Experian, Equifax and CallCredit. Experian, Equifax and CallCredit are the official UK credit agencies mandated to compile credit information of UK individuals and relay the data to prospective UK lenders upon request. All UK creditors use at least one of these credit agencies to a get your credit files.

It is important to understand that lenders are not obligated to give you credit. The decision to finance you depends on how much money the lenders project they can make from you. In other words, don’t be surprised if you get rejected because you are a savvy borrower who always repays your loans in full or shifts your debt to zero per cent to avoid paying interest.

Risk is also a significant factor in determining your credit scores. This is because failure to repay a loan poses a threat to the lender’s profits. Keep in mind that credit lenders and banks exist to make money.

Checking your credit rating online

The credit rating system relies heavily on your statutory credit files. You have the right to see your statutory files under the Consumer Credit Act passed by parliament. You will, however, be required by each agency to pay £2 per check. The quickest and most convenient way to see your files on record with the agencies is to perform your credit check online.

Visit the agencies’ direct links at http://www.equifax.co.uk/Products/credit/statutory-report.html (Equifax), http://experian.co.uk/consumer/statutory-report.html (Experian) and http://www.callcredit.co.uk/stat-report-online/ (Callcredit) to perform your check. It is possible to check your credit files at CallCredit for free, but you will need to know your way around the process.

You statutory credit files will contain your personal details, credit accounts, any missed payments, list of other searches on your file as well as information on other people’s financial links. Instant online credit check reports are possible, but depend on the agency’s ability to instantly verify your identity. Sometimes you may be contacted to confirm your identity.

Evidently, it is important to check your credit regularly to ensure your rating is healthy and to reduce chances of credit rejections. With a healthy credit score and a good understanding of how the credit system works, you can easily play the system to your advantage.

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