Getting a credit report is an often overlooked but important phase of financial planning, whether you’re about to apply for a mortgage or a comparatively smaller consolidation loan.

The process of attaining reports might seem trivial, especially if you know you can make repayments and remain comfortable, but is worth doing on the off chance that whilst you may consider yourself to be financially secure, there is every chance that a lender will not, and you could end up being refused a loan. Remember that a lender’s ideal customer is one who never defaults, but one who also never repays loans early, so if you think you will be granted a loan because you have always paid well over the minimum monthly amount, think again.

The consequences of being refused credit equates to having a big black mark stamped on your credit report, which in turn will make it harder for you to borrow credit in the future – it is very, very easy for customers to get caught in a downward spiral of rejection, which can put you in a compromising position for the future.

Seeing as you can practically get access to your credit reports for free these days, with all the major credit report agencies allowing you to check your records online, there really is no excuse not to do it – do it in your lunchbreak whilst eating al desko.

The main credit report agencies in the UK are Callcredit, Equifax, Experian and TransUnion. All of these groups routinely check and update their databases with personal credit information on UK citizens. Data is obtained from your bank details – lenders liaise with credit report agencies in order to build up accurate portraits of customers – and other sources such as the electoral roll; you can immediately improve your credit rating by making sure you are on it and eligible to vote.

It currently costs around £2 for a full credit report to be sent to you in the post from one of these agencies. However, by checking online, you can get access to your credit reports for free – most agencies allow you to sign up for their online report services for a free 30-day trial period. This way, you can sign up, get what you need and cancel your account.

It is worth arming yourself with as much information as possible when applying for an important loan such as a mortgage – being refused credit will immediately put you on the back foot, and could lead to you being gazumped, even if you manage to secure a mortgage in principal from another lender.

Credit reports will be able to tell you how likely it is that you will be granted a loan or not; if it looks like you will be refused a loan, then there are a number of things you can do to improve your position. Lenders like customers who act predictably, so try to regulate your monthly outgoings, and make sure you do not miss payments, or default as little as possible. Banks are also not keen on early repayers – whilst it is quite literally in your interest to clear your debts as soon as possible, it is not in theirs! Lenders want to see a return on their investment, i.e. you. Try to balance repaying more than the minimum amount, but resist the temptation to pay large amounts off all at once – it could end up costing you more down the line.

Tips to improve your chances of successfully applying for a loan:

• Be predictable – equalise your expenses and outgoings

• Don’t Default – frequently missed payments will see you marked as ‘high risk’

• Don’t Repay Too Early – banks won’t pay out to someone who won’t make them as much money as they could

• Cancel any dormant cards – there is such as thing as ‘too much credit‘. If you have a number of cards, cancel the ones you don’t use that often.

This entry was posted on Saturday, April 5th, 2008 at 8:54 am and is filed under Credit. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.