CREDIT RECORDS, CREDIT FILES & MORTGAGE LOANS - ADVICE FROM LETTINGFOCUS.COM
LettingFocus.com expert Lawrenson explains how to improve your credit score and your credit file.
Buy to let expert David Lawrenson of www.LettingFocus.com says, "The credit crunch led to many mortgage lenders turning down lots of people with a less than perfect credit record. This is part of their overall strategy of tightening loan criteria following the credit crunch and worries about borrowers’ indebtedness. However, their are ways you can improve your credit score. In this article I look at…
- The things that affect your credit score
- Checking your credit rating
- How you can keep your credit file up to date
- What to do if you find something wrong on your credit file (and the kind of things that can be wrong and why)
- How to post a notice of correction on your credit file
- Why you should avoid “Credit Repair Companies”
As financial companies take fright because of the credit crunch, there has been a big increase in the numbers of people being being rejected for loan and mortgage applications.
POOR CREDIT RATING
Lots of people think that it is just those with a poor credit history and people who have lived abroad for a long time who are suffering when it comes to getting credit. However, many people who have a poor credit record for other reasons too.
But there is a lot that people can do to improve their chances of getting credit - whether that’s for a mortgage or a credit card.
One simple way is to make a habit of reviewing your credit report file every year - or even every 6 months if you are more worried.
HOW CREDIT FILES AND CREDIT RECORDS WORK
But first it is worth understanding how credit files work.
Sadly there is a lot of ignorance of credit reports and how they are compiled.
It is estimated that one third of people don’t know what a credit report is used for and 20 per cent did not even know that credit reference companies hold information about their financial health.
All lenders use one of more of the three main credit reference agencies to check whether you have kept up-to-date with your credit repayments and to do this they use some form of "credit scoring" system.
These systems help them decide whether or not to lend to you and especially when it comes to personal loans (and to a lesser extent) mortgages, at what price (i.e. interest rate) they’ll lend at.
CREDIT FILE BLACKLIST
There is no credit file blacklist only information which is based on your past credit history. It is a myth that previous or current occupants of your home can affect your score - they can’t unless you have a joint account with them.
However, there can be many reasons why your credit score is not as good as it could be - and often it could be something really simple that’s at fault, like the fact that you are not registered on the voters roll in your new property.
This may simply be an oversight on your part. After all, getting yourself on the voters roll as soon as you have just moved may not be your first priority!
Unfortunately, any information that’s missing or failing to tie up with a credit application could either lead to you being refused credit or being offered an inferior interest rate.
GET HOLD OF YOUR CREDIT FILE AND CREDIT SCORE
To get your credit file all you have to do is contact one of the three main credit reference agencies - Experian, Equifax or Callcredit. By law they have to provide you with your report and the charge for it is just a few pounds.
With Experian and Equifax you can request a paper copy to be sent to you by applying on line - their sites are at www.experian.co.uk and www.equifax.co.uk. With www.callcredit.co.uk or there is a form at their site which you can print out and fill in along with a £2 cheque or postal order.
REASONS FOR REJECTION FOR LOANS
If you are rejected for a loan, it could be that you don’t match the customer profile for that product or that you already have too many credit accounts - even though you may be making all your repayments on time.
On the other hand, by not having taken out any credit in the past, you can also negatively affect your credit rating your lack of any payment or credit history can result in a low score. This is a particular problem for people who have not had a UK account or not lived at a UK address for a long time.
If you are rejected for a mortgage, ask the lender why and hold fire on making lots of other applications via other lenders - as multiple “foot prints” on your file may damage your rating more.
CHECK YOUR CREDIT FILE
When you have got the credit file, check that all details are correct. It’s very rare, but it can happen that another person’s credit report may have been mixed up with yours. Even worse that that, you may be the victim of identity theft.
If things are wrong tell the the credit reference agency, who will talk to your lender and highlight the item as disputed. You may also be able to put a "notice of correction" explaining your current financial status and the reason - which any future lender considering any further applications will see.
If you have had a joint account with someone who has a poor credit record, this will affect you, so if you are no longer financially dependent or sharing a joint agreement, tell the agency and they should be able to disassociate you from that person.
Other things you can do are make sure you are registered on the electoral roll at your current address and make all mortgage, loan and card repayments on time.
Also, pay off any old debts, especially county court judgments and close dormant accounts because lenders look at what your available credit is, even if you are not using it.
This is a very rough outline. For more advice on credit files ask about our one to one advice service.
ABOUT DAVID LAWRENSON AND LETTINGFOCUS
Our main work is in our consultancy role in which we help organisations and public bodies with their products and services for the private rented sector. If you are from an organisation go to our home page: LETTING FOCUS HOME PAGE
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Copyright 2011 David Lawrenson. This article must not be copied or re-used without the author and copyright owner’s prior permission.
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