What is a credit report?

Information on your credit report is used by lenders to determine whether or not they would like to grant you credit. A poor credit rating, and perhaps surprisingly, no credit rating at all, can leave you in a position where it is difficult for you to have a credit card application approved.

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Credit card companies, along with any other body you may want to borrow money from, decide whether you are a good or bad risk based on your personal information that is held by the three main credit reference agencies: Equifax, Experian and CallCredit.

Depending on the picture that is painted by your credit history, credit card companies will decide upon what they see as a fitting offer. A poor credit history (and even just a lack of credit history) usually goes hand in hand with a high rate of interest. However, if your credit report shows total unreliability then you may not even be able to borrow at all.

A credit check enables the searching body to see exactly how many credit cards you have got, how much credit is available to you, and your balances on each of the cards you have. Lowering the amount of credit that could potentially be available to you should be helpful when applying for credit as it shows that you have little potential to go on a spending spree and get yourself into financial trouble. It is wise then to cancel any unused credit cards to minimise your possible access to credit.

A credit search also allows the searcher to see how many applications you have made although they will not know whether the applications have been successful. This can be misleading as a large number of applications could mean that you decided not to proceed as opposed to being turned down, or even that you have been a victim of fraud, however, it is more than likely that a large number of applications will be perceived as a large number or refusals and suspicions will therefore be aroused.

It is therefore not wise to just keep applying to credit card companies in the hope that there is somebody out there that will eventually approve your application. Doing your research and ensuring that you fit the criteria before you apply is the best way to avoid application rejections staining your credit rating.

If you do decide to go ahead with an application, ask the lender to do a quotation search as opposed to a credit search. Many lenders will not be able to do this but it is worth a try, because if they can, then it will not have any negative affect upon your credit rating.

It is not unheard of, and it is certainly not impossible, for the information on your file to be incorrect, which would unfairly affect your credit rating. To find out what information is held on your file, you can look at your personal credit information held by Experian and Equifax, two of the biggest credit reference agencies in the UK.

If you feel that there is incorrect information, or that you are being misrepresented by the information that they have, you can add a statement of correction to your file, which can be up to 200 words in length, and will be supplied to potential lenders in the future.

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