Credit Information

Also Read - Guide to Consumer Credit | Guide to Credit Problems

When you start out your credit file is clean and from that point on your credit choices and repayment behavior count in the decision of lenders. But how does it count and why should you care?

Whether a lender will accept your application for finance depends upon a credit check, which reveals your:

• Your credit history
• Your credit rating
• Your personal circumstances

So your credit history and current situation, will factor in the lenders decision. Lenders could decide you are a low risk of defaulting or incurring payment arrears, based on your credit file.

Credit Information - Finance Applications

When you apply for any finance the lender performs a credit check on you, but what information do they use, and what bearing does this have on your application? The information below should help demystify the process for you.

Credit Checks - Credit History

When you apply for any finance the lender performs a credit check on you. They are looking to see if you are a reliable person who will repay their obligations on time.
The credit check helps lenders in assessing the level of risk they are taking in granting your request, and also has some bearing on how much you are charged for the finance.
Your credit history file is kept by credit reference agencies and the lenders contact these to study your credit history.

Credit History File - Credit Rating

Your credit history file started the day you opened your first bank account, and records every financial transaction you've made. Included is your credit card use or any applications for credit cards, every late payment you have made or any current arrears you owe, your mortgage repayment history and every loan you're had or are still paying off. This previous history forms the basis of your credit score.

Credit Scores - How You are Rated

The lender applies for your credit file report from the credit reference agencies, and reward points based on their scoring system. The lender wants to see how you have managed your credit obligations in the past, to help determine if they should approve your request for finance now, and helps them determine the rates of that finance.
The scoring system varies between lenders and will take account of many criteria with emphasis placed on particular details. A high score would mean you are more likely to pay on time and aren't in danger of defaulting on payments. A low score means you are considered a risk and have a problem credit rating.

Personal Information - Current Situation

This information consists of employment history, salary information and family situation.
Most of this information comes from companies you deal with, are or have been employed by and some from sources like the electoral roll, which reveals information like your address.
As you can see your credit file contains your personal situation and you can see how this can be used to assess how trustworthy you are. A poor current circumstance could determine whether a lender accepts or refuses an application.

Finance Application - Accepted

As you can see your past repayment history and personal situation can decide a lenders mind. If you have always repaid on time, are employed in a well paid regular job and score well your application stands the best chance of being accepted.

Finance Application - Refused

If on the other hand, you constantly were late with repayments, are frequently out of employment and scored adversely on the credit check your application will stand a greater chance of being rejected.