Finance Hot Trends

If youre one of the thousands of people in the country who, each year, arranges a loan to fund a purchase, or if you apply for an overdraft, store card or credit card, or even a mortgage to buy a new home then the lender you approach will conduct a search of your past credit behaviour, in order to score your application.

This score is made up of several factors and together these factors can provide a lender with an idea of whether or not you would be able to handle any new finance, based on your current and past credit behaviour. As a rule of thumb, the higher the score, the lower the risk to lender that you will not be able to repay. Higher scores can also influence the rate of interest that will be offered to the applicant.

Typically, lenders will have a minimum score at which they will consider lending to and any score which falls below this minimum will likely be declined. Similarly, any score which is above the minimum is likely to be approved, although in borderline scores – where your score is only marginally above or below the minimum – then the application may be scrutinised in greater detail by an underwriter before any decision is made.

It is, however, important to know that not every lender will score your application in the same way, as each one has different criteria and scoring methods. Because of this, lenders credit scores differ from those provided by credit reference agencies, which are designed to provide an indication of how a lender might see and assess your credit record.

Bear in mind, though, that while you may get turned down for finance by one lender, it is not necessarily the case that another lender will also turn you down due to the differences in their respective credit scoring methods.

Be wary, though, as a credit check leaves a footprint on your record, and too many checks on your credit file over a short period of time can have an adverse affect on your chances of obtaining credit.

So too can other factors, such as a poor payment history of current or past accounts you have held – such as defaults, late payments or county court judgements (CCJs); being listed on the electoral roll, or having a stable and secure home address and employment history. In addition, if the applicant has little or no previous credit history, or does not have a current bank account then these too can have an impact.

Other factors which may affect your credit score include financial associations you may have with others, such as a joint bank account; or dormant credit accounts which the applicant may hold but does not use.

Conversely, paying bills on time, keeping balances low on revolving balances such as credit and store cards and only applying for credit when you really need it can show potential lenders you are responsible with your money and are more likely to keep to any credit agreement.

Every person in the UK who has had any form of credit will have a credit file, and the file is continually updated with new information obtained from creditors and also from any other companies to whom an application for credit has been made. Every finance lender in the country will request this information from at least one of the credit reference agencies in the UK whenever an application is made.

As a result, it makes sense therefore to check your credit report on a regular basis and report any inaccuracies you might find. By doing so, you can get a rough idea of whether or not your current credit score will be enough to qualify you for the finance product you have applied for.

Related posts:

1. What Does Your Credit Score Tell You?
2. Can I Get a Car Loan With a Credit Score of 520 With an Easy Approval?
3. Common Credit Score Myths
4. Your Credit Score Matters
5. Understanding Credit Report Score

Tags: Credit, credit account, credit file, credit rating, credit reference agency, credit score