Be a good credit risk
When you
approach a lender to ask for credit, the lender
has to make a decision based on commercial
fundamentals. They need to ascertain whether you
are likely to default on the credit, or whether
you will be able to repay the amount borrowed.
They also need to deduce whether you are likely to
be a profitable customer. For example lenders
make more profit from people that do not repay
their full credit balance every month,
but pay back the minimum payment and
thereby pay lots of interest on the money borrowed
as the months progress. The lender may not
want to you default, but equally they may look for
customer that are likely to generate lots of
profit by way of interest payments. Being a
good credit risk means ensuring your credit file
is accurate and that you have no adverse
information on your files. You need to be
experienced at having credit, but to also have a
good payment record without defaults. You also
need to have stability, in terms of where you live
(not moving address too frequently) and
employment.
Credit agency
data
There is
more than one credit reference agency in the UK,
but all the credit agencies gather data from the
same types of sources. This may be called 'shared
user data', because the companies sharing the data
with the credit reference agencies may also be
users of the data. By pooling their data together
the users hope to reduce fraud
and avoid serial bad payers and
defaulters. The credit check that the credit
agencies provide are also broadly similar and
offer a profile of the persons name and address
and history and credit and payment records. When
the end users run a credit check they may
receive a preferential rate in terms of what they
are charged to access the data, this may
reflect the fact that they pass on data to
the credit agency, so in return the agency offers
a reduced rate, and of course it may reflect the
fact that the user has a need
for very many checks and would qualify for a
discount for quantity. In any case,
the shared data is very important to the
credit agencies in compiling the reports and
provides an additional insight into consumer
payment
patterns.
Verification
Before a credit agency can
provide information the agency needs to verify and
check that the enquirer is bone fide. For
companies wishing to access credit reference
databases, as well as being registered to access
sensitive credit data, the agency may also have
very secure login procedures and additional online
security measures. The company may also need to
conform to specifications set down by the agency,
and there may be intensive end user staff
training. When the agency provides consumers with
access to check their own
credit report online, again there may be stringent security considerations before the credit agency can release
the data for the consumers own credit check on themselves. The consumer will need
to match the exact details that the agency already has on their database, and checks will
need to confirm that the name and address are an exact match. In some
cases the agency may check by asking for additional information in order to verify that
the correct person is checking their own credit file and no-one else is gaining access to
someone else's credit file.
Free Credit Check
A free credit check may
be an option offered by the credit agency in
order to encourage you to check your file - you
can help them to help you
by correcting mistakes. They may also provide the option to continue monitoring your credit report so
you can check for unexplained events or spot a problem such as a missed
payment quickly. This can help you. The agency and the consumer can both benefit in this
way. Also the more aware the consumer is about their credit file, the less
likely it is that they will have issues with it and need to contact the
credit agency at a later date because of disputed data. A free credit check therefore offers
benefits to both parties. |
Credit Check
