What is Credit Scoring – Your credit score

Credit scoring is a system that lenders use to predict how you will repay and handle your new possible account with new lenders. These scoring numbers are different from one lender to another, so if you are rejected for one offer from a company you may not be declined for another from a different lender.
Your credit score not only determines what products or services you can get but how good the offers on these products will be, if you have an excellent credit score you may possibly get a better deal the expected. On the other hand, if your credit is not the greatest you may not get the initial offer you applied for and with higher interest rates or you may not be approved at all.

What Do the Banks Know About You?

There are three main sources of information used for scores.

1. Your application form is how lenders get their vital information such as how much you make, your family size, even if you own your own home. It is critical that you fill in this information correctly, it can determine if the lender will even look any farther into you credit history and can determine if you receive the loan or not.

2. Your history with the company plays an important part of the decision process as well. They can look at your pervious and current accounts to see how well you have managed them to determine your likely hood of paying your debt in a timely manner.

3. Credit reference agency Experian, Equifax and Callcredit collect information, permitting them to send records on any person to potential lenders. All lenders use at least one agency when reviewing your file. This data comes from three sources…
• Electoral roll information. This is openly available and includes addresses and who lives with who information.
• Court Records. County Court Judgments (CCJs) and Bankruptcies indicate if you have a history of debt problems.
• Financial Data. Banks, building societies and other financial organizations assemble details of all your payments and transactions

What the Banks Do Not Know About You?

The following things are not on your credit report:
• Fines: Any fines you have acquired, such as parking or driving fines. Although they are issued by the courts, they are not ‘credit’ issues so they are not listed.
• Savings Accounts: As savings are not a credit issue, they do not appear on credit files.
• Medical History: Medical problems you may have had in the past are not published.
• Criminal Record: No criminal convictions are listed.
• Child Support Agency: Information from the Child Support Agency is barred.
• Information on relatives: Given that you do not have any joint financial products, there is no information about members of your family who live, or have lived, with you or any other third parties.
• Student Loans: This information is not supplied to credit reference agencies. The only exclusion is if you have a County Court Judgment against you for lack of payment, then that can be included.
• Debts more then six years old: The time span of credit files is more often than not six years, so if something happened more than six years ago it will not be on your file.

Help others find this article at:

del.icio.us Digg Furl Reddit Google Technorati

Filed under Credit Card Saving |