Lenders want to make sure that you are a good risk and do not have a history of bad debts and unpaid loans behind you. To do this they will check your entry on credit registers. Credit reference agencies such as Experian, Equifax and CallCredit PLC hold factual information about you and this allows a lender to check your name & address and your past credit history, including any County Court Judgements or defaults recorded against you. A poor credit record won't necessarily prevent you from getting a loan, but you will probably have to pay a higher interest rate. The self employed, or those - increasingly common these days - on short-term contracts may not be such an attractive risk to lenders. People are refused credit for a number of different reasons and there is no automatic 'right' to credit, although it is illegal to refuse credit for reasons such as race, gender, religion, sexual orientation or address. A common reason however for being turned down for credit may be because information held about you by a credit reference agency, or information provided in your application form, suggests that you will have problems repaying.
Most lenders go through three main credit reference agencies for information on your financial past - Equifax (www.equifax.co.uk), Experian (www.experian.co.uk) and CallCredit PLC (www.callcredit.plc.uk). These three agencies, although business rivals, work pretty much along the same principles.
Each compiles credit histories from a number of different sources, including the electoral roll, county court judgements and how effectively past debts have been paid. Every time you open a new form of credit it will leave an electronic foot print on your record, which the agencies use to compile a credit 'scoring' system. When you apply for a personal loan, the lender - be it a bank, building society or whatever - will firstly run a credit check on you to see what kind of 'score' you have.
If you are turned down for credit, this is not a decision made by Experian, Equifax or CallCredit PLC, but by the lenders, based on their own criteria. If you want a copy of your own credit report, both firms will oblige. Experian for example has a low cost credit report order-line: (0870 241 6212). You will need to have handy your name, date of birth, current address, any previous addresses over the last six years handy, plus a credit card or debit card in your own name. The fee for ordering a credit report by phone is £2.50.Reports should be sent out within 7 days.
For a more instant look at your credit history, Equifax offers an online service, for which it charges £11.50, or its postal service if preferred costs £8.25 for a report.
If a lender refuses you credit, it must say why. Under the Data Protection Act, if you are refused credit, and scoring was used to help the lender decide, you can ask for a review of your application.
