Credit Rating

When you apply for a credit card, the card provider will decide whether or not they wish to offer you credit and if so then at what cost, that is, what rate of interest. This decision will be primarily based on your credit history. Your credit history is detailed in a credit report, which is maintained and updated by a credit reference agency. There are three credit reference agencies in the UK:

Equifax Plc
Tel: (+44) 0870 514 3700

Experian Ltd
Tel: (+44) 0844 481 8000

Call Credit Plc
Tel: (+44) 0870 060 1414

Credit reference agencies hold information on most UK adults such as their registered addresses, registration on the Electoral Roll, any County Court Judgements (CCJs), bankruptcies and insolvencies, as well as any credit card or loan applications. When you apply for a credit card, the credit card provider will check your credit report and put a mark on your file. This mark stays on your report for up to two years, depending on the credit reference agency consulted.

Each time you take out a credit card or loan, information about your payments, such as if they were made on time and in full, is recorded on your credit report. Paying your outstanding credit card balance in full and on time will improve your credit report, because it shows future credit providers that you are a low risk customer. There is little chance of them losing money, because you always repay any money that you owe. A good credit report means that you are more likely to be accepted for credit cards, loans or mortgages in the future. If you have never had any form of credit, you may find that credit card applications are rejected because the card provider cannot assess the risk you pose. Similarly, if you missed credit card payments, made late payments, or only made minimum repayments over a long period of time, you may find your applications are rejected because you present a risk to the card provider.

Your credit report is not the only factor that a credit card provider will take into account when assessing your credit card application; they will verify your identity, determine how long you have lived at your current address and whether you own your home, consider your age, your employment history and your current salary. A credit report is an important factor in the success of your application however, and you ought to ensure that it is as accurate and positive as possible. You can ensure this by examining and improving your credit rating.

If you filed for bankruptcy, this will be shown on your credit report for at least six years. Of course, this has a negative affect on your credit rating, because credit card providers will be concerned that you will miss repayments in the future. Your address will also become associated with the bankruptcy order. If you move to an address with such an association but were not bankrupt yourself, you should ask for the association to be removed because it could affect your credit rating. Once a bankruptcy has been discharged, or if it is annulled, you should contact credit reference agencies to update your report since they may not be automatically informed. Even after you inform them, a previous bankruptcy order may be featured on your record for six years.