Know your credit rating in the UK

 Your credit rating is what payday lenders UK look at when you apply for a payday loan. In fact, whenever you apply for any loan such as a mortgage, credit card or even a mobile telephone contract your credit rating will be checked by the potential lender. Your credit rating plays a very large role in whether your applications for credit will be successful or not, so it might bode you well to take a look at what the three credit reference agencies in Britain have to say about your credit history.

Your credit rating is kept up to date by agencies

There are three credit reference agencies in the country – Equifax, Callcredit and Experian. All three agencies will hold information about your credit history. Every loan you have taken out or applied for, mortgages, all your credit cards and store cards, overdrafts – pretty much any money you have borrowed. They also keep a record of your debt, and not only that but every default on any payment on any credit that you have ever taken out. All this information is kept up to date and by constantly calculating against your history, the result is your credit rating.

These days getting a loan out of a financial institution is like trying to get a tan in the dead of winter. In fact lenders across the board are very picky about which applications get approved. Even payday lenders are turning down over 70 % of their applications.

What are the types of occurrences that could have an adverse effect on your credit rating? It does not take much to tip the scale. Bob took a loan out with a bank in July 2006, and paid his monthly installments without fail for the next four years. Due to personal reasons, he then moved home and changed bank accounts, and ended up defaulting on his payments for a couple of months before he settled the remainder of the loan in one go. He has not been able to get any credit since. According to the three agencies any default in payment on a loan stays on your credit report for six years, and there isn’t much you can do about it. If, however, Bob’s payment history since the incident is unblemished, it will begin to have a positive impact on his rating.

You wouldn’t think that where you choose to live would affect your rating, but it could. If you change address a little too often, this can affect your rating as an ideal customer. Lenders often look for stability alongside the credit rating. Have you lived in the same home for a long period of time, been with the same bank or held the same job for a while? Those who are more nomadic are statistically more likely to default on payments.

A complaint from Linda warns you to follow up on your credit rating as she had to take steps herself to make sure that the credit agencies had corrected her records after she had paid off all her debts. According to the agencies this process should happen automatically, but sometimes the lenders are lax about informing the agencies when debt is paid off as opposed to how quick they are to report a default.

So knowing and nursing your credit rating can clearly save you a lot of headaches when you are about to apply for a loan. Make sure you also check all three agencies as some lenders will only check one or two. And remember, it is possible to work towards a better credit rating. With payday loans and payday lenders UK it is even possible to improve your rating if you manage your loans correctly.