Understand your credit rating

Your credit rating can affect whether you are accepted for a loan and it can also affect the interest rate that you end up paying. Here are some simple ways that you can understand and even improve your credit rating.

1. Understand what a Credit Report is

Many people do not understand what a credit report actually is. Sadly, they believe that having poor credit means that they are on some magic “do not loan to” list. In reality, a credit report is something that everyone has as soon they create any kind of credit history.

Your credit report is held by the three credit reference agencies in Britain: Equifax, Experian, and Callcredit. However, holding the credit report is as far as these agencies go – they do not decide your credit rating.

In fact, there is not any kind of agency that is specifically designed to interpret your report at all – the institution or person requesting the report is left to interpret it on their own.

2. Obtain a copy of your credit report and review it.

Sometimes a poor credit rating is not the individual’s fault, but is the result of an error on their credit report. By law, you are allowed to see your credit report and for a very small fee, any of the credit agencies will divulge this information to you within seven days.

After obtaining your credit report, take the time to give it a careful review. Be sure to crosscheck all of the information provided on it with your own records to ensure that the report is completely accurate. If anything is in error, contact the credit agency and have it fixed. Remember – individual lenders are left to interpret the reports on their own, you want to make sure you are putting your best information forward.

3. Be Proactive

You are ultimately responsible for your credit report, whether it is good or bad, and whether you are at fault or not, you are the only one who can change it. That is why it is very important that you are proactive about your credit record. The first step is to ensure that you actually have a credit record – lenders want to see that you can handle debt and will be hesitant to be the first to lend to you.

On the other hand, you do not want to appear to be a “credit-seeker”, so cancel any credit card accounts that you no longer use and cancel any overdrafts that you no longer require.

4. Protect Yourself

Identity theft is frightening and can devastate your credit report. Protect yourself against identity theft by being careful with your personal information and always reviewing your bills and statements.

You should also protect yourself against simple negligence. Absent-mindedness can cause you to forget to pay a bill. If this happens often enough it will affect your credit report. To solve the problem, set up standing orders and direct debits to take the guess work out of paying bills.

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