Credit rating
The best deals are reserved for those with squeaky clean credit histories. So to make sure you’re a prime candidate for the best rates or cards available, it’s best to know how the system works.
Lenders rely on credit scoring to determine the customers they will accept and the interest rate charged on borrowing, whether it be for a mortgage, credit card or personal loan.
They compile a score for each person based on information supplied in the application and on their credit report, provided by credit reference agencies Experian, Equifax or Callcredit.
Reports include a history of activity in the past six years and show if payments were on time or late. Each credit application is also logged on your report.
Lenders are cagey about revealing how their credit scoring systems work, to stop anyone working the system. But you can improve your chances.
Anyone with a history of problems repaying loans will have an immediate strike against them but a big red flag is someone who fails to tell the truth on the application form.
Banks share information on customers and an applicant who neglects to mention commitments or debts will quickly be found out.
Those with credit cards and loans who make repayments on time will get a decent credit score.
Ironically, someone who has never had any debt could have a poorer score than a person with credit cards and loans because the cardholder has proved they can handle debt - as long as they kept up with repayments. So it is worth having a credit card to establish a history — just as long as you pay off the balance in full each month.
If you are having problems getting credit, or are concerned about your credit eligibility, check your report for mistakes.
Many borrowers refused credit find a debt has been logged in their name in error.
By law, you have the right to a copy of your Statutory Credit Report for £2, posted within seven working days of receiving your request and payment.
Information that lenders supply to agencies may well differ, so get a report from each of the three to get the full picture.
You can dispute any inaccurate information on your credit file and have errors corrected or removed within 28 days. The credit reference agencies will help with this process.
"Credit blacklists" of those to be refused credit are a myth. Each lender considers individuals at the time of application.
* Holly Thomas is an award-winning financial journalist and Deputy Personal Finance Editor at the Daily Express and Sunday Express. Holly's views represent her own opinions and are for general information only. Always seek independent financial advice.