Credit Ratings

Loans - how do you rate?

Summary: Your credit rating is important to you. Find out what it is and how it is calculated. Check that details are accurate, and then take steps to keep improving your rating over the years.

Presumably we have all at some time ordered an item having seen it advertised, and been disappointed with what we have received. Advertisers are able to use a variety of legal methods to attract the attention of potential customers, and as long as what is printed is the truth they should not have any problems. The ploy of knocking a penny off the price to ensure a lower first figure i.e. £399.99 is well known, as is the use of the word 'from' in the context 'from £9.99', where the product which is a whisker above basic probably costs around 50% more.

Consider also the new idea of using a foreign language, admitting to material being 'faux' instead of 'false' - very much in vogue at the moment and it obscures the stark reality of the truth. Then consider advertisements for loans which quote a rate of interest, and grab your interest because they are so low. Such rates are available, otherwise the advert would not be allowed - but who can get these loans?

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Unfortunately the answer is that only around 30% of applicants obtain these 'headline' rates and they have to have a good credit rating to get them. Other unfortunates may be offered a higher rate or may meet with a point blank refusal of a loan, and this is quite likely to have been caused by an unacceptable credit rating number. Do you know what your rating is and equally importantly do you know what causes a rating to fall to a level which is unsatisfactory to lenders?

So your first step before applying for a loan should be to find out how you stand in the credit rating stakes. You should not assume that because you have never defaulted on your mortgage or any other loan, then your rating will be good. All sizes of loan are taken into account and even such apparently minor factors as a missed payment on a credit card account or a mobile phone bill will take their toll on your rating. These are simple errors, but are there in black and white on your record.

So assume nothing - find out what your rating is. You can do this by contacting a credit reference agency. If you are in a hurry you can find one on-line (Equifax, Call Credit and Experian are the usual source of information for lenders) and a payment of around £14 will result in your speedy receipt of the required information. If you are not in so much of a hurry, a written application will cost you around £2. If you feel that these things should be free of charge you can contact annualcreditreport.co.uk. They will not provide you with the detail for which you pay the credit reference agencies but, if you are sure that your rating is good and you simply want that confirming, you will get an online reply which should provide the necessary reassurance.

More about credit ratings
Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. Security by way of a charge on your home may be required. Think carefully before securing other debts to your home.