Save money on a loan with an improved credit profile
Loan companies use credit records or credit ratings to understand their customers before they lend them money. Issuing loans carries an element of risk, primarily from customers who don't repay their loans. Of course loan companies don't know who the non-repayers are going to be in advance. If they did, matters would be much easier, they simply wouldn't allow those people to take out loans. So they need to make a judgement about the risk of particular loan not being repaid. They rate their customers based on information they gather from the loan application itself and the information made available to them by using credit reference agencies.
There are several credit reference agencies in the UK. They gather their information from banks, credit card companies and loan companies who sign up to their system. By sharing this information, all of these companies benefit from the joint initiative because they can get a good idea of a customers past financial history. The credit record held for an individual will show things like outstanding loans and mortgages, whether any loans have been defaulted on or whether any monthly repayments have been late. They also contain information about County Court Judgements against a person, whether they have been bankrupt before and also a history of lenders who have searched a credit report as a result of a credit application. A bad credit record will contain elements that make a prospective lender wary of advancing cash to a person.
So how do you improve your credit rating? The simple answer is to manage your finances in a controlled and sensible way. Don't borrow money if you can't repay it properly. That said, if you have a history of difficulties in repaying debt, there are still some things you can do. First of all get hold of your credit record and check it is correct. If there are any errors you can ask for them to be corrected. If you have defaulted on any loans in the past six years, make sure you pay them off first. These will be marked as "satisfied" and will be viewed more favourably than loans that are still "defaulted". Also check your home address history is correct. Other elements of credit records include links between individuals who may have applied for credit together and certain information which is used to detect fraud.
