An individual's credit rating determines their level of credit worthiness – simply put, how willing lenders are to supply you with credit. Your credit rating is part of your general financial health; a good online method of assessing your overall financial health may be found here. Credit ratings are calculated based on a number of criteria, from financial histories and saving patterns to existing liabilities. Lenders believe that such information will provide them with a good idea of the likelihood of a borrower defaulting on their existing loans. The lower your credit rating, the more likely you are to be denied a loan. Furthermore, in the event that lenders agree to provide you with credit, the interest rates they demand on loans will be higher for borrowers with poor credit ratings.
In the United Kingdom, credit ratings are largely determined by two organizations: Experian and Equifax. They gather information on borrowers from a wide variety of sources ranging from county court judgments and house repossessions to degrees of personal indebtedness. Every credit transaction you undertake leaves behind an 'electronic footprint' and these footprints are closely monitored by the aforementioned agencies.
Based on the information provided by these organizations and their own findings, suppliers of credit may choose to deny you borrowing privileges. However, if you believe that you have been denied credit unfairly, it may be possible to contact the relevant agency and lodge a complaint. You will be required to pay a charge for this service, generally around £2. If your credit rating was miscalculated (because the resulting score was generated by a computer program) or if it was based on the financial records of individuals unconnected with yourself, then it should be possible to question the lender's decision to deny you credit. However, it is not possible to remove any accurate information regarding your credit history from your file, no matter how unpleasant it may be.
What happens if a lender refuses to overturn their decision to deny you credit? The only real solution in this case is to improve your credit rating. The main reason behind a poor credit rating is a high level of personal debt. Remedying your credit rating therefore involves dealing with your debt issues and managing your spending effectively. Be warned, however, that whilst many firms claim to be able to raise your credit rating, this is by no means a foolproof solution. Indeed, a number of such organisations have been responsible for hoodwinking unsuspecting customers and scams are commonplace. Further advice on dealing with your credit score may be obtained from the Information Commission (Telephone: 01625 545 745 (Data Protection Helpline); 01625 545 700 (general)) which provides impartial advice and assistance to borrowers.
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