Credit

We all sometimes spend more than we mean to. It is all too easy to get the things we want without stopping to work out how we will pay for them when the bills roll in.

These pages will help you if you are thinking of borrowing money, if you want to know the best way to get credit or if you find you can't keep up the repayments.

Credit Cards and Store Cards

These allow you to spend money when you want and pay all, or part of it, back at the end of the month. If you pay back in full at the end of each month you don’t pay interest. But if you can’t afford to pay back everything you’ve spent you will be charged interest and you could find yourself getting into debt very quickly.

Store cards that you can use in a particular shop tend to have higher interest rates than general credit cards. You have to be 18 to get a credit card.

Credit Scoring

Credit providers want to make sure you can pay back any money you spend before they lend it to you (as credit) so they carry out a number of checks.

When you apply for credit you will have to fill in an application form. The lender may then work out your credit score from the info on your form. Credit scoring assesses your personal statistics, for example your age and occupation and each statistic is given a score. This is to see which broad category of borrower you fit into.

If you are refused credit because of the info on your form this may be because you don’t have enough money coming in, or too much money going out, or you are too young, or have not worked for one employer for long enough.

Credit Reference Agencies

Credit providers may also use credit reference agencies to decide whether to give you credit. Credit reference agencies keep data on over 40 million people, so there is a good chance that your details will be held on file. The info will cover most of your financial details going back a number of years.

Credit reference agencies info in your credit file includes: county court judgements (CCJ) registered against you in the last six years; your credit card payment history; details of overdrafts; as well as details of payments on mortgages, and some utility bills and details held on the electoral roll about you.

It is not just you who is under scrutiny; your credit file may contain details of other people too. In order to create a full picture of you and assess the likelihood that you will repay credit, your file may have info on anyone who lives, or has lived, at your present or previous addresses. "Anyone" includes your family (same surname) or anyone else with whom you share a financial connection. Their record may also affect whether or not you are given credit.

You are entitled to apply for a copy of your credit file under Section 7 of the Data Protection Act 1998.

Refused Credit?

Lenders do not have to tell you why they have refused credit, although industry guidelines recommend they give you a broad outline of the main reason. They may say that it was because you failed to score enough points in the credit-scoring process, or because you have had a poor record in the past. If so, you can ask them to reconsider, although you may still be refused credit.

If you have been refused credit because of info on a credit reference agency's records, you can make sure your details are correct. You can get a copy of your statutory credit report at a cost of £2.00.

Get a copy of your credit file from:

Experian
Landmark House
Experian Way
NG2 Business Park
Nottingham, NG80 1ZZ
United Kingdom

Phone: 0844 481 8000

Last updated: 30-Sep-2009