Why Should You Get Your Credit Report? |
Having error’s on your credit report can cost you a fortune in higher interest payments, but how can you avoid it happening to you?
This guide provides all the information you need to know about your credit score. You will learn what a credit score is and how it affects your ability to borrow. You will also learn how to; get your credit report from the major credit reference agencies for free; understand the different sections within your credit report and techniques to manage and improve your credit score.
The main aim of this guide is to raise consumer awareness to the benefits of knowing what’s contained in their credit report. Lenders use credit reports along with other information gathered when applying for credit, to dictate who they will lend to and at what interest rate. If you’re applying for credit, just by knowing what’s in your credit report, you can see whether or not you are likely to be accepted, without having to apply. This can save you time and effort, it also stops unnecessary credit searches being carried out, more on why this is important later.
What is in Your Credit Report?
Your credit report details all the companies you have relationships with which hold financial information about you. It uses this information to generate an overall credit score, your credit score is used by lenders to paint a picture of the financial risk of lending to you. The lender uses this along with the information gathered during the application process to dictate; if they will lend; how much the will lend and at what interest rate.
What’s My Credit Rating Then?
Credit ratings don’t actually exist, purely myth. Each lender scores you individually based on its own wish list to find a perfect customer. This is a step by step guide to share with you how the system works, checking and improving your score.
How does it Work?
When you get a credit card, loan, mortgage, contract mobile phone or even monthly car insurance lenders score you to predict your likely behaviour. Scoring systems are never differ lender to lender, product to product and are never published. This means just because one company rejects you, it doesn't automatically mean another will.
Credit scoring doesn't just dictate what products you'll receive. Most personal loan rates are? 'typical’, as the actual amount you'll pay vastly varies with your credit score. With credit cards you may get an entirely different product to the one applied for, if your score's too low for the sexy product you wanted.
Clearing up the Myths
Credit ratings and credit blacklists don't exist. There is no universal credit rating; no one-off judgment of your creditworthiness, nor is there a blacklist. It might not feel like that though as, while each lender scores differently, the information is similar, so a bad risk for one lender is often a bad risk for others too.
Lenders aren't obliged to give you credit. Applications are aggregated into millions, and banks prefer to deny a few good quality applicants rather than overspend on personalised vetting procedures or accepting large numbers of unprofitable customers.
As Always! - It’s all About Profit to the Banks
Even individuals with good credit ratings can be declined simply because they won’t make the bank money!
Credit scoring is about profit not risk. Risk plays a part as people likely to default will dent the profits, however if you are a good risk and you are unlikely to behave in a way the bank can profit from you, you can still be rejected. You must understand that the banks are there to make money, not help us, knowing this helps us play the game and beat the system.
Sophisticated Scoring in Action:
If you always pay your credit card in full credit card companies will reject you. The banks want credit card customer that are perpetually in debt, never default and always pay the minimum payment. This way they make the most amount of money out of you and don’t ever need to write the debt of, if you keep up with payments.
You might be scored for a product you haven’t applied for. Current accounts are often used to attract new customers so they can sell you other products. By applying for a current account, you might be scored to determine how likely it is they can flog you a mortgage. This way they weed out the customers that offer little profit to them on other products they sell.
Why Should You Get Your Credit Report?
We’re talking About Billions of Pieces of Data!
There are always mistakes as a result of billions of pieces of data being added and updated, which can make the difference from you getting accepted or rejected. You need to check your credit file as often as possible, at least every 18 months or if you get rejected check each time it happens. When you check your credit file it is registered on the file but this does not in itself affect your credit score.
Make Sure You Check All Three Agencies
Previously it was sufficient to check one agency, lenders are now using a wider range of agencies on which to base their lending decisions. As a result I strongly recommend you check all three, a mistake on one can impact on the others.About the Author:
Fraser Baillie is a former Stockbroker, Independent Financial Adviser and previously owned a mortgage brokerage. He gave it all up to concentrate his time on publishing http://mortgage-rates-online.org Submitted at: marketplace4writers.com - WebSite Content and Article Directory "...to; get your credit report from the major credit reference agencies for free; understand the different sections within your credit report and techniques to manage and improve yo..." |
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