Credit Rating: Credit Scoring, Blacklists, Red 2 Black Debt Management

Understanding Your Credit Rating

Credit Scoring & Blacklists

It is generally believed that everyone has a universal credit score, which dictates what credit they can obtain from all lenders � this is a myth. What actually happens is that each lender individually scores you on what they consider important for you to be a �perfect customer� to them. Just because one company rejects your application, it doesn�t automatically mean that another one will. Equally, if a lender deems you as having a low credit score they might not refuse you credit but may offer you a less preferential rate of interest instead.

However, you should be aware that most lenders work to similar credentials, so even though there isn�t a one off judgement of your credit worthiness, the information held about you will be similar, so if one lender judges you as a high risk others may do so too. This may cause you to feel that you are now �black listed� but rest assured the credit black list is also a myth and doesn�t exist.

Credit Rejection Of �Low Risk� Customers

Credit scoring is as much about company profit as it is about risk taking. Lenders may refuse credit to the most solvent of customers who religiously pay their credit cards each month, never default on payments or move their debt onto 0% cards. So even �good payers� who use credit wisely are likely to develop a low score as the lender will make very little profit from this type of customer.

What Information Lenders Use

Lenders use three main sources of information to credit score potential borrowers.

Previous Dealings With The Lender � Your Lender will use any financial history on you if you have dealt with them in the past. However, data protection regulations restrict what information can be past between different departments within the same company.

Application Form � This is the prime source of data collection, from the application form lenders obtain such information as your salary, number of dependants, whether or not you are a home owner and the reason for your borrowing. These forms should always be completed carefully and any mistakes could immediately cease your application.

Credit Reference Agencies � The three main credit reference agencies are Equifax, Experian & Callcredit. These companies compile financial data on UK residents and supply lenders with such information for the purpose of assessing perspective borrowers.

The credit reference agencies gather data from the electoral roll, this information is publicly available and shows who lives where and with whom. They also use court records for county court judgements and bankruptcies which can suggest that you have experienced debt problems in the past.

Financial Information & Data Collected

Lenders, banks and building societies collate data on customers (with their consent). This is shared by all financial organizations, which means that each one has access to your financial information from other institutions.

Data Collection

Both �black & white� data is collected, �black data consists of details on late payments defaults or problematic accounts. �White data� is information on the general operation of your account.

What you thought they use � but they don�t

Credit files hold tremendous amounts of financial data on us, but not everything. The following information is not recorded on credit reports.

- Credit Accounts that were opened before 1994
- Student Loans (Unless there is a county court judgement against you for default on this loan)
- Savings Account
- Fines
- Child Support Agency Information
- Criminal convictions
- Medical History
- Information On Family Members (unless they have any joint financial commitments with you)
- Employment Records

Links to Credit Reference Agencies