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| Credit Report | Credit Check | Credit Rating | Identity Theft Your credit report is a valuable source of information. Credit reference agencies collate data whenever applications are made for credit and also when there are changes to the circumstances of credit accounts, such as if a payment is made or if there is a further advance. This information can then be used by other lenders to determine the creditworthiness of individuals who apply to them for credit. By utilising the information in an individuals' credit history, as contained in their credit report, past behaviour allows lenders to make an informed assessment of an individual's credit risk. If an individual is considered to have a poor credit history then this information may be used to decide not to lend. Maintaining a good credit history is always a good way to ensure that credit is not refused when an application for credit is made in the future. A credit check is the process whereby an organisation will request information from an individual's credit report via a credit reference agency. Credit reference agencies collate information relating to the credit history of individuals, and this is then compiled into a credit report for each individual. The credit check is usually an important requirement whenever an individual requires credit from a organisation. As well as financial institutions, such as banks, building societies and other mortgage lenders, credit checks are also be used for credit card applications, loan applications, as well as by many mail order companies and utility operators, such as mobile phone companies. It is important to maintain a good credit history to reduce the likelihood of a credit check resulting in an application for credit being refused. Being refused a loan, credit card or mortgage can come as a shock, especially if your finances are well under control. Individuals tend to fit into one of three main groups in terms of their credit rating and the effect it has on their ability to obtain credit. The first type appears to be the perfect prospect for a lender, but due to there being so little credit history, lenders may be cautious. A lack of a credit track record means lenders cannot tell how this type of individual might behave in future and might decide not to lend because of inadequate evidence to suggest that credit can be managed properly. This type of individual should look at their credit report to see how much credit history has been built up and, when applying for credit, it is also important to explain the circumstances to the lender. For example, it may be that a mortgage has already been repaid or that a debit card is used in preference to a credit card in order to live more prudently. The second type looks fine on the surface, but there are a few things to consider. Credit reports can sometimes contain requests to lenders for information, and it is important to ensure that these requests haven’t been interpreted as credit applications, leaving searches on the credit report. These credit applications could worry lenders into thinking this type of individual is desperate for money or even that an identity fraud is being planned, so it is important to contact the lenders who made the searches and ask for them to be removed if the request is for a quote only and was not an application for credit. Asking for a quotation search won't damage a credit rating, as these searches and unrecorded enquiries are shown on credit reports but will not be seen by lenders. The second thing to do is ensure registration on the electoral roll. Lenders use the electoral roll to help them confirm addresses to validate credit applications. The third type is a big borrower who is coping well, but lenders might limit the amount of new credit they make available, in order to make sure that they do not take on too much debt. Even in circumstances where an individual has been discharged, the bankruptcy will remain on the credit report – it stays on the record for at least six years. Lenders may be cautious because they fear that obligations to them will not be honoured either. If there was a good reason forgetting into difficulties (redundancy or family problems) then this can be explained by adding a note to the entry on the credit report. Lenders should look at these notes before making a decision. It is important that credit reports are examined carefully to ensure everything accurately reflects circumstances. Identity theft involves an individual impersonating another individual (living or deceased) for financial gain or to obtain other benefits. For clarification purposes, the initial act of acquiring another person's identity is usually referred to as identity theft, whereas the subsequent activity to leverage the initial theft for financial or other gain is usually referred to as identity fraud. Often, an identity fraudster will accumulate personal details by raiding household waste containing personal documents, intercepting post or stealing other personal documents. Victims who has have their identity stolen will usually discover, often many months later, that they are being held responsible for the actions of the individual that has stolen their identity, and face significant time and effort to clear their names. In most territories, including the United Kingdom, specific legislation exists to make it a criminal offence to use another person's identity for personal gain, and there are a series of penalties in place to punish those that are found guilty. However, the irony of the situation is that the length of time that victims take to restore their good credit history can often be much longer than the identity fraudsters spend in prison, if they are caught and convicted. |
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