| This is by far the most important factor. Almost everyone in the country has a credit rating which is provided by two credit rating companies, Experian and Equifax.
These firms collate your financial history. They hold details of all your present credit agreements including payment history, amount borrowed and amount owed. This information is used to build a risk profile which decides whether or not you qualify for a card and the amount of your credit limit.
How to get a good credit rating
- A good history of paying your bills on time
- How much debt you currently have outstanding
- How much credit you're not using (you might have a Credit Card with a £5,000 balance which has a balance of only £200 so only 4% of your available credit is being utilised)
- How long you've lived at your present address - the longer the better as that promotes stability
- Whether you're on the Electoral role - again this promotes stability
How to get a bad credit rating
A bad credit rating is based on the complete opposite of above, plus whether you've got any defaults or CCJs over the last 6 months.
A Default is where you owe money on a credit agreement (loan, mortgage, credit card, even mobile phone contract) and fail to pay after several months. A CCJ, or County Court Judgment is similar; you owed money, didn't pay and got taken to court.
Factors such as late payments or whether you are on the Electoral role can easily be remedied. But defaults and CCJs stay on your file for 6 years. People with these negative entries on their Credit File will struggle to get decent amounts of credit at affordable interest rates.
Sadly, most people don't realise the power the credit reporting agencies. Put simply they are the most powerful financial organisations affecting all of our lives.
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