What you need to know about Credit Score checking

If you find yourself making multiple purchases online, you probably know the importance of an excellent credit score in this day and age. Most people seem to take loans at some point. The deals on the loans they get largely depend on their credit score. If you are new to credit scores and want to get the gist, this is for you.

What are the fundamentals of UK Credit?

UK credit ratings are created and evaluated by companies called Credit Rating Agencies (CRA). CRAs evaluate and assign each individual a score. This score tells banks and lenders how creditworthy you are.

In other words, a credit score indicates the borrower’s ability to repay the borrowed loan by making timely loan repayments and determines the chances of the borrower defaulting on the loan.

While the leading CRAs Experian, TransUnion, or Equifax have varying criteria and methods to calculate credit scores, the overarching idea is fundamentally the same – the higher your credit scores, the better your chances of securing a loan.

How important are your credit score and credit report?

Each CRA in the UK possesses a record of your entire credit history, which is known as a credit report. Every credit report contains the following details:

  • The applicant’s name and date of birth. The CRAs retrieve this information from the day the account is opened.
  • A ledger of all the borrower’s accounts. This ledger contains all bank and credit card details. If the borrower may have taken any loans in the past, their payment details and history are detailed in this ledger. Details including missed payment deadlines, defaulting on loans, and others generally stick to the credit report for at least six years.
  • Residential location. The applicant’s chances of securing a loan go up if they have a fixed location of residence.
  • Names of family members who depend on the borrower. Married couples tend to have inter-connected accounts.
  • The applicant’s current bank account holder information, which is usually linked to overdrafts.

Having an excellent credit score is vital as it is directly related to a low-interest rate loan from banks and other lending institutions.

How does your credit score affect your Interest Rate?

If you want to apply for a loan or a mortgage, your credit score can save you substantial amounts of money in interest over the loan tenure. In other words, you need to make sure you keep your credit score in check by maintaining a solid credit history.

A considerably high credit score means the banks and other lenders will have more confidence in you as a borrower. If you have an above-average credit score, banks are more likely to give you higher loan amounts at reasonable interest rates, if not zero interest. However, having a poor credit score severely limits your loan choices.

When should you check your credit score?

You probably know by now that you should check your credit report before you apply for a new loan to finance significant purchases. You also need to go through your credit report to check if all your transactions add up and ensure you haven’t been wrongly charged.

The three leading CRAs are tasked with making credit reports independently and retrieve the information from the lenders from whom you borrow, for credit reports.

This information reflects in your credit history and credit score, which is why you ought to check and update this information every now and then, particularly in the following scenarios:

  • If you change your location of residence and have not updated the old accounts
  • If there is a wrongly placed default on you
  • If you are no longer sharing a joint bank account with someone
  • If you have old credit cards that you no longer use for your transactions
  • If your application for a loan does not get approved

How can you check your credit score and credit report?

According to the laws in the UK, all the CRAs are required to hand you a copy of your credit report and your UK credit rating free of charge. You may access this credit report online or offline. CRAs generally provide you with an online form to apply for them.

However, if you want to apply for your credit report in writing, you have to ensure you specify a few vital details. Be sure to include the following details in your application:

  • Your full name
  • Date of birth
  • Your entire residential address, with the pincode
  • Other residential locations that you may have stayed at over the past six years
  • Other names that you may have used over the past six years

After the CRA receives your email, it will send you the credit report within a month. At times, CRAs ask for proof of the information that you enter when you fill up the form. Be sure to keep your documents ready to show proof for details like your name and address. You can verify them using an old utility statement or bank statement.

Conclusion

There you have it – what you need to know about credit scores. If you have an excellent credit score and history, you should have no issues getting the loans you want. However, if you find yourself with bad credit, you will have to find out how to build your credit score. As you do that, consider looking for loans for poor credit. Once you secure a loan, make sure you make timely loan repayments to boost your credit score.

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