Balancing the finances at the end of the month remains a challenge for many families. Indeed, new research from instant online credit information provider, Equifax, highlights the financial pressures being tackled by consumers, with over a quarter (25.6%) saying their biggest financial fear for this year is the rising cost of food. This was closely followed by worry about not being able to make their mortgage repayments (24%) and the increase in fuel costs restricting car usage (14.3%).
Making responsible use of available credit, paying the lowest possible interest rate, is a goal for many consumers. And that includes looking at new credit cards where they offer better terms. But Neil Munroe, External Affairs Director, Equifax is urging consumers to make sure they understand how their credit information will be used by lenders before they make new applications for credit.
“Consumers need to understand what lenders are looking for when granting credit and operating credit card accounts”, said Neil Munroe. “Knowing a consumer will be able repay the credit extended is obviously the number one criteria. But lenders are commercial organisations so they will also look at customers from a profitability perspective.
“Consumers must be as well informed as possible about how they look to a lender. Many consumers see the credit process as a complete mystery - something over which they have no control. But that doesn’t have to be the case.”
Lenders make checks with credit reference agencies to see whether an applicant has kept up to date on repaying their credit. Lenders also use a "credit scoring" system to decide whether or not to lend to consumers – and in some instances – at what price, as well as for on-going account management. But basically, the better an individual’s
credit score, the better the rate they will get, helping them take advantage of the best deals.
EQUIFAX TOP TIPS TO IMPROVE YOUR CREDIT SCORE
1. Are you Registered?
The electoral roll is used by many companies for identity verification purposes in order to combat identity fraud. It is vital, therefore, that you are registered on the electoral roll at your current address.
2. Are you credit active?
Not having many credit cards or loans can affect your credit score. Lenders are looking for signs that you are capable of repaying money you have borrowed. So it’s worth considering opening an account to establish a credit history – even if you pay it off in full at the end of every month.
3. Change of Circumstances
If your circumstances have changed and you have had difficulties keeping up with credit payments, then it’s important to say so, for example if you were made redundant or recently divorced and have fallen behind on credit repayments. You can place a Notice of Correction on your credit file explaining the background to any arrears, especially if you have now got back up to date. A lender will review this when assessing any credit applications you make.
If you believe a lender/company has provided incorrect information on your credit file, you can raise a Notice of Dispute with the Credit Reference Agency and they will take this up with the lender. This will usually be resolved within 28 days.
4. County Court Judgments (CCJ)
If you’ve had a CCJ and it is now settled make sure the settlement is recorded on your credit file. If not contact the court to get confirmation details and inform the credit reference agencies, otherwise it will stay on your file for six years.
5. Defaults
If you have a default on your credit file, it will stay on your file for six years and may affect your getting credit. This is when you can use a Notice of Correction.
6. Stop Applying
If you have been refused credit, obtain a copy of your
credit report . But DO NOT carry on applying elsewhere. Each search by a lender will leave a “footprint” on your credit file. Too many searches in a short space of time can be perceived by lenders as you over-stretching yourself financially and could therefore negatively affect your ability to get credit.
7. Avoid a high balance
Avoid carrying a balance that is more than 30% of your credit limit. Lenders may view this as excessive debt and that you may not be able to keep up with repayments.
8. Be Direct
It’s easy to forget a payment so setting up direct debits and standing orders with your bank will ensure payments go out on time.
9. Close it Down
Make sure any accounts you don’t need or use are closed. Financial companies are paying more attention to the total amount of credit available to an individual and whilst you may not be using them, dormant accounts could affect your ability to get credit.
10. Early Bird Catches the Worm
Try to pay off loans and credit agreements ahead of schedule. Lenders will look favorably on this.
Equifax recommends that anyone planning to make a new credit application obtains a copy of their credit file so that they can see exactly how their address is shown. This is how it will be checked by lenders. And if they believe the address is not properly presented, they can ask the credit reference agency to take this up with the lenders and the local authorities.
The Equifax Credit Report, with the facility to access credit information for the first 30 days free, is accessible simply by logging onto
www.equifax.co.uk. Designed to help individuals understand their credit file and see what lenders see to assess new credit applications, the Equifax Credit Report also includes expert tips and advice to help consumers take the right steps to manage their finances and navigate through life's challenges.
If the customer does not cancel before the end of the 30 Day Free Trial, the service will continue at £6.99 per month, giving them unlimited online access to their credit information and weekly alerts on any changes to their credit file. It also includes an online dispute facility to help them correct any errors on their credit file simply and quickly.
