Your Credit Rating and How to Check It

David Miles There is a lot of confusion surrounding UK credit ratings, credit
scores, credit blacklists, credit reports, and credit files. This
guide to your credit rating aims to give you the facts you need.

What's in a Credit File

There are two major credit reference agencies in the UK, Equifax
and Experian, who maintain credit files on virtually every adult
in the country.

Almost all companies that give you credit terms will supply
information to one or both of these two credit agencies.

Therefore, your credit file is likely to contain information on
all your existing credit and loan arrangements, such as personal
loans, mortgages, credit and store cards, bank accounts, etc. In
addition, your credit record will contain information on any late
or missed payments and the amount of the original debt still
outstanding.

The credit reference agency files also contain electoral roll
information for your address and court records relating to you.
It is this information which allows prospective lenders to
confirm your address and also see if you have any outstanding
CCJs.

Whenever a mortgage lender or other company is assessing an
application for credit, they will check the details held on you
by Equifax and/or Experian. The reason they do this is because,
by law, they are not allowed to request any information about you
from any other companies with whom you have a credit agreement.

Also, by contacting one of these two agencies they can gain
access to your entire credit history with just a single request
rather than having to gather the information from multiple
sources.

Each time a lender makes a search of your credit file, that
search will be recorded and added to your file, leaving a credit
check "footprint". Therefore, it is easy for a prospective lender
to see if someone has been "shopping around" for credit, and this
in itself could be a deciding factor in whether or not they agree
to give you a mortgage.

Your credit file will also include details of other people living
at your address if they are financially linked to you, or if the
credit reference agencies think they are financially linked to
you. In this way, other people's bad credit history can sometimes
drag down your credit score. But if you find you are wrongly
linked to another individual, you can write to Experian and
Equifax and ask them to correct the mistake.

How can I see my credit file and correct any mistakes?

Under the terms of the Data Protection Act, the credit reference
agencies Equifax and Experian are required to provide you with a
copy of the information they hold on you in return for a small
administration fee. At the time of writing (2004) the fee for
each agency is £2.

Your details are supplied by post, but you can request a copy of
your file by telephone, post or email. Details or how to apply
can be found on the Equifax and Experian websites.

Remember that because some companies supply information to
Equifax, some to Experian, and some to both, you will need to
order copies of your file from both agencies in order to get a
full picture of your credit record.

Alternatively, the online service available from checkmyfile.com
will allow you to undergo a free credit score check, as well as
download (for a fee) a copy of your full credit report.

If, after having obtained a copy of your credit file, you find
that it contains errors, you can take the matter up with Equifax
and/or Experian and ask them to correct the mistakes. Full
details of the procedure for correcting your file are available
on the companies' websites and are also sent in the post along
with the copy of your credit file.

Credit scores, credit ratings, and credit blacklists

First of all, let's dispel a popular myth.

A lot of people think that there is a "blacklist" you can end up
on if you have a particularly poor credit history, and that if
you are on this list you will automatically be refused credit.

This is simply not true - there is no such thing as a credit
blacklist. If you have been refused a mortgage or other form of
credit, the reason will be because your credit score was not high
enough.

When a lender requests information about you from a credit
reference agency, they apply a mathematical formula to that
information in order to give you a credit score. Different
lenders will use slightly different factors to create the score.

Also, the definition of a good or acceptable score will vary from
one mortgage lender to another. Therefore, it is quite possible
to be turned down by one lender but be accepted for a mortgage by
another.

Given that you are potentially worsening your credit score every
time you approach a lender about a mortgage and they run a credit
check on you, and given that different lenders will have
different criteria for assessing your credit worthiness, it makes
sense to talk to the experts right from the start if you are
looking to take out a mortgage but suspect you may be hampered by
a poor credit record.

If you're worried that a poor credit record may affect your
ability to obtain a mortgage or remortgage, Clean Slate Mortgages
can help put you find a mortgage adviser who specialises in
finding mortgages and remortgages for people with credit
problems.

------

Copyright 2004 David Miles. You are welcome to reproduce this article on your website, so long as it is published "as is" (unedited) and with the author's bio paragraph (resource box) and copyright information included. In addition, all links to external websites must be left in place.

About the Author

David Miles is the editor of Clean Slate Mortgages, a website that provides information on debt, credit records, mortgages and remortgages.