How Secure Loans Work
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When you attempt to get credit, whether it's a store card or credit card, a mortgage or a loan, for example, it will be necessary for you to undergo a credit check by the lender that you are approaching for credit.
A credit check is a tool for a loan provider to evaluate your past and present financial history, which includes whether you meet your financial obligations on time, are late in making payments, or have neglected payments. A credit check also shows other unresolved debts and any history of County Court Judgements (CCJ's) and other lapses.
This therefore gives the creditor a picture of what degree of financial risk you present if they decide to lend to you - and what the likelihood is of getting the loan paid back! In the end, no one is keen to offer money to someone who pays it back late or doesn't pay at all! This checking process is known as credit scoring.
There is a number of organisations who store this data concerning you - the major ones are Experian and Equifax.
In the event you are making a decision about taking out any kind of credit, get a copy of the credit report first. This is for you to examine if all of your information included in it is accurate and query anything that looks out of place. For instance, only a tiny bit of distorted information - maybe your file mentions an outstanding debt that was paid - could mean the difference between being approved for a mortgage or loan - or not.
For a copy of your credit file you can contact a credit record agency. They will charge you a small amount (about £2) and a copy will be sent to you for your perusal.
Make sure that your credit file records you on the electoral roll - if this is not the case, this will have a detrimental impact on your score. Also, financial 'associations' - where maybe a person who is living with you or who lived at your address before has an inadequate credit score - will influence your capacity to get credit.
If you see anything that is wrong on your file, make contact, in writing, with the organisation who has listed incorrect data concerning you, and send a copy to the credit reference agency as well.
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