20 May
20May

Credit reference agencies – Experian, Equifax, and TransUnion collect your financial information that further your lenders and other financial firms use to make decisions about deals on loans, credit cards they can provide you. It is a credit score that serves as a basis for determination of interest rates. The higher score helps you get the loan at lower interest rates. Whether you take out short-term loans or long-term loans, you have to make sure that you do not fall behind repayments. 

Defaults on your report can force your lender to say no to anything from a mortgage or instant loans online. Being oblivious to what had shown up on your report can push you on the verge of losing your collateral – in case of long-term loans – and minimal chances for approval of a new short-term loan. It is not surprising that most of the borrowers end up with rejection because the credit reference agency has recorded an erroneous default before the lender peruses it to know about the creditworthiness. 

Even if you make a request to remove the default, it is likely to linger on your report for at least 60 days. Credit bureaus record your name, address, date of birth, current commitments, defaults, the number of times you have applied for loans, late payments, and CCJs. Your name is likely to be similar with anyone and chances are the bureau records the default against your name that belongs to someone who has your name in common. 

Despite making constant requests to remove the default, the reference agency may be powerless to do so unless the financial company confirms that you have fallen victim to identity fraud. The failure of direct lenders or credit bureaus to record updated and correct information often keeps borrowers from taking out even a loan for bad credit at competitive interest rates. 

These agencies play a paramount role to those who are living in the red, but you have unfortunately very little control over what they have recorded. If you find an erroneous detail in your report due to any means, amendments do not take place unless the company who submitted it provides the updated information. A lackadaisical attitude can cause the default to show up for up to 6 years. Now you may have understood how imperative it is to go through your report sporadically. In fact, one erroneous default can call your creditworthiness into question. 

Of course, when loan companies provide data of millions of borrowers, it becomes a big challenge for credit reference agencies too. They carry out multiple checks before they add information given by the lender to the report. However, you should also take up the responsibility of perusing your credit report at least once a year to ensure there are no anomalies that may hold you back from applying for a loan

Here is how you can avoid your score being tarnished:

Timely bill and debt payments

Before disbursing your money, the lender always checks your payment history. It is a good indicator to know how smartly you have managed your financial commitments. Short-term loans like online quick loans in the UK often come with high-interest rates if your credit rating is less-than-perfect. Secondly, you are unlikely to get the best deal. Therefore, try to pay all of your utility bills and debts on time. If you continue to pay them on time, your score will go up.

Use a credit card smartly

A credit card can help you tide over small expenses during an emergency, but make sure that you do not use them for impulsive purchases. Try not to max out your card. The rule of thumb says that you should not consume more than 30% of the credit card limit. Otherwise, the lender will skeptical about your repayment capacity. They may infer that you rely on debt for your day-to-day expenses.

Have correct information on your credit report

Try to have your name registered in the electoral roll. Make sure that your name, address, date of birth and other personal details are correct and up-to-date. Look over your report to ensure that it does not contain a default that is not in your knowledge.   In the nutshell, the only way to build your credit score is not to fall behind repayments. The record by credit bureaus helps lenders know the probability of getting the money back they lend, equally, works in your favor as it ensures they do not lend money if you cannot afford it.

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