13th June 2013
Most business owners have a need for credit every now and again. It isn’t always a huge amount, with thousands of people all over the country applying for it regularly for purchases that they don’t have the immediate funds for, such as computer equipment, or to help with cash flow. Regardless of the amount, credit checks will be undertaken by the lender before the loan application is granted. It’s also important to remember that credit checks are carried out for hire purchase items such as mobile phone contracts or company hire cars. Therefore, it’s important to keep your credit rating as healthy as possible.
Regardless of what you may be applying for credit for, the bank or finance provider will perform a credit search to see how reliable a borrower you are. They will use the information they source to build a picture of your spending habits and to see how you have handled credit in the past. They will use various sources, such as your application form and credit reference agencies that will provide them with data regarding any CCJs you might have, what previous searches you may have completed and whether you’re on the electoral roll.
In a nutshell, a credit reference agency stores various aspects of your finance history for the purpose of future credit checks. A bank or loan provider uses information from these agencies to ascertain how much of a risk it would be to lend you the money you have asked for. Anything that may count against you will be seen in these reports, with much of your financial activity being kept on file for six years. If you’ve filed for bankruptcy or have defaulted on a payment to your credit card or energy supplier, your credit report will reflect it.
Luckily, you can see for yourself what your credit report says. While you won’t have access to the criteria that the banks and lenders use to determine whether to grant you your finance, the credit report they will see from the credit reference agencies can be seen by you, too. It’s particularly useful if you are considering applying for finance but would like to check your report first to see whether there’s anything on there that may affect your chances.
For business owners it can be worth paying a monthly premium to access your up-to-date credit report whenever you need to, giving you the peace of mind that there will be no nasty surprises when you’re applying for finance to help your business along.
This article was provided by Experian