Have You Checked It Out? 25/09/2007

As we turn on our TV or pick up today's newspaper there is a high chance we will come across an advert for low cost loans for those with bad credit. As a country we are spiraling in debt and the percentage of people with loans and credit cards against their names is countless. Companies in response to our debt are offering ways to “help” us out of our problems; but, can they really help if our credit score is already tarnished ?

Many people are not aware of how their credit score stands or how credit scoring works. Checking your personal credit reports however is the main source lending institutes and banks compile and judge us on to check our credit rating.

Credit scores represent our individual purchasing power. A high credit score represents buying power and low represents debt. If your credit report score is low you will find it very hard to obtain credit and will often find lenders will apply high interest rates to cover and to minimize risks involved. Keeping a close eye and being aware of your credit report will ensure you understand why your score lies where it does, and areas you may need to improve.

Payment history accounts for 35% of your credit score and missed payments in this section can reduce your credit score dramatically by 50 – 100 points. To prevent this it is advised that payments to your creditors are paid in full each month or a direct debit for the minimum payment should be set in place. Another factor that can drastically decrease your report is bankruptcy which can knock 200 points off.

Reasons you may be declined of credit from lenders are not solely based on your spending habits and financial position. How long you have been in your current address, who you live with, whether you own or rent your home, all effect's lenders decisions. Each lender also has their own cut off score for applicants to be accepted or declined. This is why you may be accepted by one lender but not by another.

It is wise to take a look at your credit report and familiarize yourself with how it works and where you stand. There may even be aspects that you believe should be on your report or, mistakes that you would like to bring to attention. Small errors may be preventing your lending capabilities or report in general. Companies such as Experian offer free credit reports on-line, which are easy follow and most importantly digest.