Credit Scores Explained

Research has recently suggested that consumers who apply for loans and other forms of credit too often through comparison websites may risk damaging their credit rating.



It is estimated that 8.7 million people have bought financial products such as loans, credit cards and insurance through using comparison websites over the past year.



However, research shows that the sites could be leading consumers to adversely affect their credit rating as many of the comparison, or aggregator, sites concentrate on price rather than quality of service or suitability of a product.



As a result, consumers are drawn in to applying for unsuitable products and are therefore continuously rejected.



Although rejections are not held on a person's credit record, applications for credit do show up as "footprints".



Consumer affairs manager at credit rating company Experian, said: "All the applications you have made for credit over the past 12 months will show up on your credit report.



"When a lender carries out a credit check they will see those applications and if there are a large number of them it may make them think that you are desperate for credit, or it may even look as though someone has been fraudulently trying to apply for credit in your name," he said.



The financial comparison site that commission the report, MoneyExpert.com, states on their website that 2.8 million people have made applications for 3.5 million financial products over the past year. Around 6 per cent of people have been rejected when applying for credit cards, mortgages and loans.



MoneyExpert.com has launched a credit profiling service that allows consumers to tailor their search so that only those credit providers whose lending criteria suits their credit rating appear on the list.



The profile is based on the consumer's answers to questions about their history and no footprint is left on the consumer's credit record.



Professionals in the financial industry are now calling on all comparison sites to offer a similar service. Customers must also be warned about the potential damage to credit rating that could be done by making too many applications.



Websites should also improve their offer to consumers by being more transparent on fees and charges imposed by providers. They also need to broaden the focus of sites to include service and features other than price.



No one has an automatic right to credit, but if you are refused on the basis of your credit rating you can tackle the problem.



If the decision to refuse you credit was made by a computerised credit scoring system, you have the right to ask the lender to review the decision.



Most High Street lenders will make a decision on whether or not to grant you credit on the basis of information supplied by the UKs two leading credit reference agencies - Experian and Equifax.



These two firms compile credit histories from a host of different sources such as:



Data held by the agencies

Electoral register

County Court judgments

Bankruptcy and administration orders

Credit payment history

House repossessions



Your record will be highlighted if you have had a large number of credit checks carried out. Everything from buying a freezer on an interest-free deal to opening a new credit card will leave an electronic footprint on your credit history.



However, the decision to refuse credit will be made by the lenders, based on their own criteria, but if you are refused credit you could check your credit history to make sure no mistakes have been made.



Within 28 days of your last contact about a credit deal, ask the lender for the name and address of the agency which provided the information. You can then write to the agency yourself and ask to see your information on their files.



To do this you will need to send a 2 fee, give your full name, address and postcode, as well as the details of your addresses over the past six years.



If you are a sole trader or partnership, give your business name and address in case your information is held under those details. The agency must then reply within seven days.



If you find the decision to refuse your credit was unjustified or wrong, and there is further relevant information which may change the lender's mind, you can ask the lender how to go about having the decision reviewed.



You can ask for your credit history to be changed if it is incorrect or includes details about people with whom you no longer have financial connections with.



You can also have notes attached to explain certain periods in your history. However, you can't get information removed just because you might find it embarrassing.



Most national newspapers advertise companies claiming they will repair your credit rating. However, these firms offer will charge a high fee.



You have the right to ask credit companies in writing, at any time, for a copy of your file. The Information Commissioner can provide consumer guidance leaflets with further advice.






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