Before we begin, here is a range of the common terms you may come across in regards to this topic. A default is a term that is used to indicate where you've not fulfilled your financial requirements. When you have passed over a payment on a mail order account, for example, they can file a Notice of Default on your credit report. This will have a negative effect on your credit report at a later date if you want to take on more credit.
A 'CCJ' actually means County Court Judgement. This is a legal judgement decreed by a County Court in connection with someone who is in debt to someone else (another person or business) or where they have not met the stipulations of a credit arrangement. A CCJ will establish a suitable reimbursement arrangement so that the indebted person can payback their debt. CCJ's are noted on public record and will affect the debtor's opportunities of getting more credit for as long as six years.
Equifax is a significant credit referencing agencies in the UK. Equifax pulls together all your credit data from a range of sources to establish a report that presents your personal credit history - i.e. your credit report. When you request for any kind of credit, lenders will check out you report to get a picture of your financial history. You could apply for a printed copy of your file at any time to know that everything is correct. The Equifax online site has a lot of valuable suggestions on making sensible credit decisions and protecting yourself from scams.
A Credit Score is something used by loan, mortgage and credit companies to decide whether you qualify for a particular product. A Credit Score looks at your current and past financial history, plus other personal details, and using mathematics, analyses what type of 'risk' you are.
By 'risk' we mean whether it is likely you'll pay back the money borrowed; whether you can really afford the repayments etc.
Factors that can affect your score include:
1. late or missed payments in the past
2. County Court Judgements and arrears
3. How much you currently owe - even if all your payments are up to date
4. You not being on the electoral roll
5. Applying for lots of new credit accounts - this is viewed that you are someone getting into financial trouble
6. The length of your credit history
7. Financial associations - other people listed on your credit file that have bad debts can affect your credit rating
Why Your Score Matters
Your Credit Scores matters because it is probably the most influential factor used by loan companies in deciding whether they will give you a loan/mortgage/other credit.
However, it is the lender who makes the final decision and they may well take in to account reasons for past credit problems. Apart from checking out your financial history, they will also need to look at your occupation; whether you have any equity in your mortgage, your income and savings etc.
