A credit-check is run when you apply for credit, find out what they see about you.
Lenders credit-check you when you apply for a loan, credit-card-debt, pay as you go mobile phone contracts, and pretty much anything these days. What they find on that credit check, will determine if you get the credit or not. Best case scenario, a poor credit-rating will mean the debt has a higher interest rate and costs you more. Your credit-score is reflective of your credit-report, which contains a wealth of personal and financial information about you that has been collected from public records as well as from lenders and financial institutions.
Isn't access to my credit reports free?
Whilst some people think that getting access to their credit score is free this is not technically the case. The main two credit reference agencies in the UK both provide pay-monthly credit report services. These online credit services enable you to pay a monthly fee in return for continuous live access to your credit report. The smallest of these credit reference agencies, which is CallCredit, allows you to get access to one free credit score each month if you are signed up to the monthly credit report service, which costs £12 every three months.
Experian which is the largest credit reference agency, provide a free trial to Credit Expert, their pay monthly service. However, you will have to pay £5.95 for your credit score when you sign up. Equifax, also run a free trial to the monthly credit report, but again, you will have to pay £5.95 for your credit score.
The largest credit agency?
When we say largest or smallest, what this releates to is the number of lending decisions they are involved in making. Experian is involved in the most of these, and therefore when you apply for credit, chances are it is the Experian credit-check being used. So it's important to make sure this is up to date. Equifax second, CallCredit next. That's not to say that Equifax and CallCredit aren't important, they are. But when cleaning up your credit-history, you should focus your time and effort in this order. Equifax and Experian would cover 60-90% of all lending decisions so, these deserve real attention.
Stat Reports versus Online Credit Reports
Whilst the credit reference agencies do offer access to £2 statutory credit reports, which you can order as and when you want them, the ability to order your credit score does not comes with these reports. You can only order your credit score when you are signed up to the pay monthly services with these agencies. With these online services, such as Credit Expert from Experian, you will not only get the opportunity to order your credit score but you can also benefit in other ways such as getting valuable tips on improving your credit, having access to dedicated teams to resolve disputes and issues, identity theft protection, and instant online access to your credit information.
About the credit-check
The three different credit reference agencies will not all give you the same score, as their numerical values that determine which category you go into in terms of your credit vary. For example, with Experian a poor credit rating is one where the score is 720 or below whereas with Equifax it is one where the score is 349 or below. Basically, each time a lender does a search on your credit file because you have applied for credit they allocate a rating to you, which is confidential and specific to the applicant. The credit scores from the credit reference agencies are provided as a guideline, giving you the opportunity to carry out a general health check on your credit rating. This score does not determine whether or not you will get credit, as this is decided by the specific score that each lender allocates to you. However, it will give you a good idea with regards to whether you are likely to be accepted for credit based on your guideline credit rating.
Whilst it is not impossible to get finance with a poor credit rating, if you do get the finance that you need you may find that you pay way over the odds in interest because of the state of your credit and credit rating. You therefore need to keep an eye on both your credit report and score, especially if you have plans to apply for finance in the near future.
When to check your credit score
If you are working towards improving your credit status then it is a good idea to keep a close eye on your credit score, as this will enable you to monitor how well you are doing in terms of improving your credit. As your credit improves your credit score and rating will improve, and this will also improve your chances of getting affordable finance from a mainstream lender.
It is a good idea to check your credit score before you apply for any form of finance, as this will give you a better idea of how likely it is that you will get the finance that you need. You will be able to see whether, based on the value of your credit score, you fall into the poor category, the fair one, the good category, or the excellent one.
If you check your credit score and it is lower than you expected then it is a good idea to go through your credit report with a fine tooth comb to see what is causing the problem. This could be anything from poor repayment history or making too many applications for finance in a short space of time to inaccurate information on your report or even fraudulent activities carried out in your name, which have shown up on the credit report.