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Understand Your Credit Report And Credit Score

Did you know that the information held about you on your Credit Report and your credit score has a much wider impact than just whether you will get a mortgage or not?

Most people know that applications for mortgages, loans, car finance and credit cards are approved or declined based on information on your credit report and your credit score. But did you know, access to mobile phone contracts, insurance products, utilities, renting a home and even getting a new job can all be affected by the information that's held on your credit report and your credit score?

Take a home insurance policy, for example. Pay the annual premium upfront, and there are usually no finance charges. Elect to pay the premiums monthly, and in most cases, you are going to be subject to insurance premium finance. The interest rate the Insurer (or Premium Finance Company) charges you depends on your credit score. We have seen interest rates set at 0% for the highest credit scores through to 35% for low scores.

Credit scoring is a sophisticated process used by many lenders and service providers. It's a tool which analyses historical financial behavioural data to predict future behaviour. In other words, it's predicting, based on certain factors about you, whether or not you are likely to be able to pay the money back and maintain the repayments. The actual data used to make those predictions vary from lender to lender and is a closely guarded secret.

However, it doesn't matter that we don't know all the data used and how it's used because we do know enough to be able to ensure that our credit scores are the best they can be. Make sure that you are doing all the following things to make sure that your credit score is as good as it can be:

  • Pay all your bills on time - A disputed payment with a Mobile Phone company or utility company, for example, will damage your credit report and score if you miss payments. If you have a dispute, continue to make the payments until resolved.

  • Pay credit agreements on time all the time - One missed payment from as long ago as 6 years can impact your score.

  • Keep credit card usage below 50% of the credit limit.

  • Make more than just the contractual minimum payments on credit cards.

  • Stay within any pre-approved overdraft limit.

  • Make sure you are on the Voters Roll at your current address.

  • Keep new credit applications to a minimum. 'Hard' credit searches will lower your score in the short term.

  • Check your credit report regularly and deal with any errors promptly. Check for signs of ID Theft.

The bottom line is keep credit commitments to a minimum, control them carefully and make payments on time. If you have a poor credit history and, or a low credit score, there are mortgage solutions available. Please contact us for more information on how we can help.

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