A Complete Guide to Your Credit Report

Credit Report: What Is It and Why Is It Necessary?

Credit report of the borrower (this applies to both physical and legal persons) is a special report that includes information on all the interactions of the person with the lenders. Here one can see all the facts of the client’s applications to credit institutions, including regarding the issued loans: contract conditions, such as landing amount and credit length, credit balance, credit ceiling, loan servicing, loan delinquency, loan restructuring, etc.

There is also information of the borrower’s name, place of living, place of work, payment history, as well as information about how properly the borrower repays the loan. Separate section of the credit record contains public records, such as information of bankruptcy if it happened to be, tax liens, repossessions and foreclosure. So, credit report includes all the details about all loans and credit cards that the person has. In other words, this report includes information of how the borrower manages his debt.

Data about the borrower and received credit are transferred to the credit history bureau, which classifies all the information that is received from various financial institutions and carries out all the necessary procedures related to its information processing. Any banker can apply to the credit history bureau and ask for information regarding a particular borrower, to have an idea of the person he is going to provide a loan to.

Why the credit report is necessary? Firstly, the borrower presents himself to the bank and at the stage of the loan provision the credit report shows what level of confidence the bank can have. Secondly, a good credit report will allow the borrower to borrow larger amounts of money than that available before. Thirdly, the bank will provide more favorable conditions for its client, relying on long-lasting relationships built on trust. Also, loan term is reduced because of the fast processing of client information by submitting a request to a special credit history bureau.

Credit history bureaus offer the clients to view a free online credit report. This service costs nothing but is very helpful, because it allows the borrowers to know for sure what his credit report contains. Information available for the lenders will be available for the borrower as well. A free online credit report allows the person to be aware of the most recent credit report changes. It’s advisable to use the data contained in the free online credit report in order to ensure success of loan applications and prevent situations of getting rejected for a credit card, mortgage or loan. The immediate information received from this report also contains a credit score and allows solving many problems.

It always makes sense to periodically check your credit history using free online credit report, as often errors occur in such reports, for example, the borrower has already repaid the loan, but the bank employee forgot to update the information and the borrower still owes money to a bank. Also, a regular check of the credit report will help to avoid serious trouble related to the consequences of possible identity fraud, that is, illegal use of personal information to get money in the bank. Timely check of the free online credit report will help to know about this fact as soon as possible and take appropriate actions.

Accessibility of the free credit report on the Internet helps to save money during the credit card, mortgage or loan application process. Many people throughout the globe use the excellent option of viewing the free online credit report to properly manage own credit status.

What Defines Credit Score and Why Is It Necessary?

Credit score is a qualitative indicator of the borrower, who applies to the bank to raise a loan. This is an estimate of the probability that an individual will be able and willing to clear own debts. That assessment is based on a study of all available information on the total assets and liabilities of the borrower, risk level and credit history that includes information about the timeliness of payments of interest and repayments of principal of loan in the past.

For the individuals with high credit score it is much easier and cheaper to get a loan than for the borrowers with low credit score. Companies that specialize in the collecting and analyzing information about the borrowers and assigning them a credit score are called credit rating agencies.

The borrower’s credit score is a number calculated using the formula, or mathematical algorithm. This number is a highly-precise forecast of the borrower’s ability pay off loan. There is no common credit score all over the UK. In other words, if you’re turned down for a loan by one lender, it doesn’t mean that you will be also turned down by another one. A credit score consists of a range of components. And each of them has a different impact on the credit score that varies from 0 to 1,000 marks in the UK.

So, the main components that affect the credit score include:

  1. The frequency of loan payments that shows the lenders whether the client meets his debt obligations properly. The smaller the number of delays in payments, the higher the credit score is.
  2. Current debt. The larger amount the client owes to a bank, the less chance he gets a new loan. It’s not advisable to get the second and third loans without urgent need.
  3. Credit payment period. The longer the period during which the borrower repays debt, the more predictable his subsequent behavior is. If a customer didn’t have problems with repaying long-term loans, it would not be a problem to raise a new loan.
  4. Frequency of the borrower’s applications for loans. It’s a great shortcoming if the client always ekes out a living from loans.
  5. Loan types. Thus, a mortgage or a loan to purchase a car adds more points to the score.

It should be taken into consideration that the borrower can build a good credit score for a few years, but lose points very quickly at a delay in a few payments. Accordingly, the borrower must clearly fulfill his credit obligations. Only in this case, borrowed money in any banking institution will be always available for the client.

It’s possible to check credit score for free. Now there are some companies that render services giving the clients an opportunity to get their credit score at no cost. In such a way, the borrowers will be able to understand what is considered during the calculation of their credit score, which measures have to be taken for the improvement of the credit score. Also, choosing to check credit score for free the borrowers can compare their credit score with other ones. Financial stability of each individual depends on his repayment ability. So, it’s critical to know own repayment ability and hence monitor current debt situation and credit status on a regular basis.

If the borrowers use the possibility to check credit score for free, there is a possibility to find out how they can save money on mortgages, loans and credit cards. This increases the rationality of money resources’ use. So, regular check of the credit score allows each borrower to significantly improve financial health. And the first step on the way to its improvement is to check credit score for free at one of the specialized companies.

What Defines Annual Credit Report and Why Is It Necessary?

An annual credit report is a report that includes data concerning a borrower’s loans, credit status and repayment history. There is also data regarding the borrower’s address of place of residence, social security number and place of work. This credit report contains information about all loan applications, including cases when the borrowers have been declined for a loan. Credit score refers to the most significant parts of the annual credit report. Property owners, banking institutions and potential employers always study the annual credit report to make a decision whether it’s work to deal with a potential borrower or not.

It’s not difficult to get the annual credit report. There are three main credit reporting agencies in the UK that offer the consumers a free annual credit report. They are CallCredit, Experian, and Equifax. This offering is available once per year. Also, a special website was created that contains credit reports from these agencies. This is the way to receive a free annual credit report.

There is also a possibility to make written and phone requests to mentioned credit reporting agencies to get the annual credit report. If the borrower uses one of these ways to obtain his annual credit report, it will take from one to six weeks to obtain it. Those borrowers, who prefer to get a free annual credit report through the Internet, choose the quickest method to do this. Some Internet-based credit services provide the clients with the annual credit report at no cost only once as an incentive, however the monthly and quarterly credit reports the borrowers will get for a nominal sum of money.

Credit reporting agencies or online providers of the credit reports offers instructions attached to the annual credit report, so that each person would be able to understand it. Different companies render different services and charge different sums of money for their services. It’s necessary to make a comparison of available offerings before ordering an annual credit report.

Regardless of the way the borrower choose to get his annual credit report, it’s extremely significant to know the information it contains, as well as know how it is changing. To successfully qualify for a mortgage, credit card or loan or pay back a loan, one must be aware of credit score included to the annual credit report. This knowledge will assist the borrower in finding possible mistakes in the credit report and therefore correct them timely. In such a manner, the borrowers can avoid identity fraud. Also, the ability to manage finances helps to maintain financial health.

How It Is Possible to Check Credit Score

Application for a loan in the UK means that lender will study the borrower’s credit score on a mandatory basis. Credit score is known as a number calculated according to a specific formula that demonstrates the individual’s ability to meet payments. This score is what the lenders rely on, while estimating the probability that this individual can pay back money. Past credit history of the individual is the basis of any credit score.

The higher the score, the higher probability the individual will discharge a debt is. To get to know a credit score of the potential borrower the lenders use the services of a credit history bureau. CallCredit, Experian and Equifax are in the list of the major credit history bureaus throughout the country. They hold credit reports of the borrowers all over the country. Credit card providers, banking institutions, finance companies give them the get data about the borrowers’ credit status.

It’s extremely significant to check credit score on an ongoing basis to make sure that it gives evidence of good financial health. Identity fraud can be also noticed thanks to the regular check of credit score. Negative credit score may follow from the actions of the swindlers, who have thieved the borrower’s personal data and used them for raising a loan, getting a mortgage, opening a bank account on behalf of this borrower.

Any borrower has a right according to the Consumer Credit Act to check own credit report. For this purpose it’s necessary to turn to the mentioned credit history bureaus. Credit report, as well as credit score can be checked fast and simply through the Internet by adhering to the instructions given on the websites of the credit history bureaus.

Those borrowers, who don’t have an access to the Internet, have an option to make a written request to the credit history bureau. It is obliged to give a response not later than seven working days after the date of the request. The cost of this service is £2. The consumer must provide certain information in the letter. It includes the full name, as well as any other names the person has been known by (for example, maiden name), the date of birth, the full current address, including any addresses where the person has lived over the past 6 years.

Also, the consumer must provide a postal order or cheque for £2 made out to the credit history bureau the person addresses to. It this case a statutory credit report will be accessible. In such a manner, the borrower will have a general understanding of his own credit history. Any check of the own borrower’s credit report doesn’t have an impact on credit score. But to make a credit score accessible, the consumer must use additional, paid credit report services of the credit history bureaus. These services are rendered on a monthly basis. And the fees charged for them vary from company to company.

What Individual Has to Know about Credit Score Range

Credit score is a quantitative determination of a great value in the modern credit world. Before creditors makes a decision whether to accommodate an applicant with a loan or not, they check the individual’s credit history to get to know the borrower’s credit score. Knowing credit score helps the borrowers to have understanding of how creditors see their credit report. A credit score range is known as a scale on which the lenders rely to estimate the potential recipient’s of a loan ability to meet payments and credit status. This is the way to determine the individual’s probability of repaying a loan. Repayment history is a basis for determining this probability. In the UK, credit score may vary from 0 to 1,000.

A good credit score is marked on the credit score rating scale. The individual can achieve and retain it by satisfying payment obligations on loans and credit cards on timely basis. It should be noted that the person cannot attain a good credit score by just not using financial products, such as mortgages, loans, credit cards and so on. It’s crucial for everyone to keep a good credit score. Partly, well-established credit history is a basis for a good credit score. The higher credit score number the individual has, the lower interest rate is charged on this individual.

A credit score of 700 and above is regarded a good one. Though, it is not a uniform rule. The matter is that each credit reporting agency uses own specific formula or statistical model for calculating credit scores. It means that the scoring system applied by a particular creditor has a direct impact on a good credit score. Scales differ in each scoring system. But if the one credit reporting agency determined that the person has a good credit score, it is most probably that this person has a good credit score with the other creditor as well.

Also, the lenders and banking institutions differently define a good credit score depending on the type of financial product the person is qualifying for.

In the UK, the average credit score for an individual is 750. However, this number varies during the year and depending on the company that calculates a score. If the person attains a credit score that exceeds 750, such a person can easily borrow money to satisfy own needs and purposes. And if a score exceeds 850 it is regarded excellent.

The person, who has such a credit score, can raise a loan at any moment, as the lenders take very low risk issuing loans to such individuals.

The borrower’s credit score is considered low if it is below 600. If the borrower has a low credit score, he can be rejected, while qualifying for some financial services and products. Also, in case of keeping a low credit score, the borrower may get much less money than he qualified for at first.

Such a credit score often leads to high interest charged on the borrower or the borrower may face problems, while starting a bank account. The person, who has a low credit score, must take reasonable measure for its improvement for avoiding mentioned problems.

Possibility to Improve Credit Score Is Available for Everyone

If a person has ever faced problems trying to borrow money or use other financial service, it’s advisable not to make further attempts to raise a loan, but identify the causes of rejection of the loan applications and take reasonable measures for improving a credit score. The following measures help to improve a credit score.

  1. Credit report check. Lenders study credit report information given by one of the credit history bureaus each time the potential fund receiver qualifies for a loan. Lenders agree or decline to provide a loan relying on information contained in the credit report. So, it’s very significant to make sure this information is correct by regular checking own report for possible mistakes.
  2. Correction of errors. Once a person has found errors in the credit report, they have to be corrected within the shortest possible period of time before these errors negatively affect a credit score and inhibit access to favourable financial offers. This can be done by getting in touch with the credit history bureau and notifying it of the found errors.
  3. Reducing the debt burden. Availability of numerous credit cards together with other debt service obligations may lead to a rejection of a new loan application. Paying back some loans or closing some of available credit cards enhances the likelihood of getting a new loan.
  4. Getting on the electoral roll. Creditors check the address of the applicants using the electoral roll. If a person is not on the electoral roll, most probably this person will not be accommodated with a loan. To get on it, an individual must get in touch with local council officer.
  5. Proof of stability. Lenders tend to provide loans to people, who can demonstrate stability in their life. A person, who has own house and is a full-time employee has more chances to be granted a loan than a person, who rents a house and doesn’t have a regular place of work. Also, it’s better to qualify for a new loan before drastic change in life that may affect the ability to meet payments.
  6. Watching time. Lenders can see all applications for financial products and services made by a particular person. Multiple applications during a short time interval make signals to the lenders that the person is in urgent need of money. Consequently, the lenders may take a cautious mind and deny a loan. So, it’s recommended to not to qualify for a loan not more frequently than once or twice in any period of a few months. Frequent applications will lead to frequent rejections and hence decrease in a credit score.
  7. Making timely payments. Delays in payment or non-payment lower a credit score dramatically. It’s difficult to overestimate the significance of making due payments under a credit contract. If an individual cannot settle a payment obligation, this individual must get in touch with his lender to find a financial solution that will be suitable for both parties. It should be always remembered that the entire information about defaulted payments is available on the credit report of each person.
  8. Building excellent credit history. A credit score is a powerful tool that allows the lenders to forecast behaviour of potential recipients of a loan. If a person doesn’t have a credit history, the lenders will be beware of providing a loan to such a person. Therefore, this person may be declined a loan. To solve this problem and prevent such situations, it’s necessary to choose the right type of a credit card, such as a so called credit building card. If an individual fulfills all the obligations under an agreement and makes timely payments, it’s a perfect opportunity to build an excellent credit history and hence increase a credit score. This is the way to be accepted for highly-beneficial financial products.