Credit Rating

To do this they do some checks on you and assign you a credit rating. Different companies have different processes, but the idea is always the same. If your credit rating doesn't hit the right level, you will be refused credit. This process is also known as credit reporting or credit scoring.

It's not the end of the world you if do get refused credit, Capital One offer a credit card for people who have been refused and for those who have a poor credit history, but there are other things you can do, too. Not least of which is having a greater understanding of the processes involved. And one of the first things to learn about is:

Credit Reference Agencies

An important part of the process of assigning you a credit rating involves Credit Reference Agencies. The lender will have access to a file about your creditworthiness held by the Credit Reference Agency. This file contains such information as:

• Electoral Roll information from your local Council - this is updated every month
• A record of all previous searches of your file which have been carried out over the preceding 12 to 24 months.
• Existing and past customer credit agreements from lenders which are updated monthly ( late payments of credit cards, for instance, are recorded).
• County Court Judgements (CCJs) and Scottish Decrees, Individual Voluntary Arrangements (IVAs), Bankruptcies and Administration Orders.

The two main Credit Reference Agencies in the UK are Equifax and Experian and for £2 they will send you copies of the files held on you. You can apply online at their websites. If you do find errors you can send a Notice of Correction or an explanation of personal circumstances that may have led to problems with your credit rating. This can be money well spent. Get both, they may have different information.

If your files are less than perfect, there are steps you can take to improve your creditworthiness. Click here.

And, just as importantly, if you are lucky enough to enjoy a healthy credit rating, there are things you can do to keep it that way. Click here.