Credit Card Debt Versus Personal Loan
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When you make an application for any credit, whether it is a credit or store card, a loan or a mortgage, for instance, you will undergo a credit check by the loan company that you are applying to for credit.
A credit check is a method that allows a financial organisation to see your financial history, past and present, including whether you settle your financial obligations on time, make late payments, or have failed to make payments. A credit check also indicates any outstanding debts and any history of County Court Judgements (CCJ's) and other lapses.
Consequently this gives the loan company a picture of how much financial risk you will be if they choose to give you a loan - and what the chances are of getting the money back! Of course, there is no one who is willing to offer money to someone who doesn't make payments on time or not at all! This checking system is referred to as credit scoring.
There are some agencies who store this financial information - the best known are Equifax and Experian.
If you are thinking about taking out any kind of credit, request a copy of the credit report before anything else. This will give you an opportunity to examine if all the data within it is right and question anything that is not right. For instance, only a tiny bit of mistaken information - maybe your report mentions an unpaid debt that has been settled - might be the determining factor for being offered a mortgage or loan - or not.
To obtain a copy of your credit file you will need to make contact with a credit record agency. They will charge you a small fee (about £2) and they will send you a copy for you to look through.
Verify that your record includes you on the electoral roll - if you are not there, this will have a negative consequence for your credit score. Also, financial 'associations' - where perhaps someone who lives with you or previously lived at your address has a low credit score - will have an influence on the probability of getting credit.
If you spot any detail that is wrong on your file, get in touch, in writing, with the company who has given inaccurate data about you, and deliver a copy to the credit record agency as well.
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