Best Loans Articles

A few years ago, prior to the credit crunch and banking crisis, it was relatively easy for a person to obtain the credit they required, whether this was for a home owner loan, personal loan, credit card, or other credit agreement or hire purchase contract.

After being accused of offering loans too easily and cases of irresponsible lending, the majority of loan companies are now a lot more reluctant to offer loans to potential borrowers without making sure that the customer will be able to afford the monthly loan repayments once the loan has been offered.

With money also being tight for the loan companies themselves, banks and other lenders have now severely tightened their lending criteria, becoming a lot more careful about whom they are prepared to offer a loan of any kind to.

The main way a lender will ascertain whether a potential borrower is credit worthy is to carry out a credit report on the individual applying for a loan. This is normally carried out through one of the main three credit referencing agencies in the UK, which are: Experian, Equifax and Call Credit. 

A person’s credit file contains all their individual financial information, such as any existing or previous loan agreements, their home owner loan or mortgage and any credit cards or other credit agreements they may have, even if these have a nil balance.

As well as the basic details about what level of credit a person may have, the credit report also shows how much is outstanding on the loan or credit agreement, what the original amount of the loan, or credit limit, what the monthly repayment is and also whether there have been any missed payments or arrears on any of the loan accounts.

The credit report also shows if an individual has any defaults on loans or any County Court Judgements (CCJ’s) or previous bankruptcies or Individual Voluntary Arrangements (IVA’s).

All of this information will be taken into account by the loan company before they are prepared to offer anyone a new loan. If a person has a poor credit history, with arrears and CCj’s, or even missed payments, this will reflect negatively on that person’s ability to be accepted for the loan they applied for. Even having a lot of outstanding credit will reduce the individual’s credit score and reduce their ability to be accepted for a loan, or have the rate of interest on the loan increased to reflect the additional risk.

This is all well and good and a potential borrower should always check their credit file before applying for a loan or other credit. It is also wise to check your file on a regular basis, whether or not you intend to apply for a loan or other credit, just to ensure that your records are correct.

On occasions, it is possible for the credit reference agency to hold incorrect details on a particular individual regarding their financial status (this is one important reason why you should regularly check your file). If this is the case and the credit file shows arrears on personal loan, for example, which have either been cleared, or were never there in the first place, then this could have a detrimental effect on that person’s ability to be accepted for the loan they applied for, or even mean that they are rejected for credit either now or in the future.

So let’s assume that you have checked your credit file before applying for a loan and found that there is false or incorrect information held on your record, which would affect your likelihood of being accepted for the loan you want… what can you do about it and how do you get the information corrected, or removed where appropriate?

The first thing to do is to approach the credit reference agency which holds the incorrect information. They receive many queries of this nature and generally have a standard procedure in place for handling false information.

Although it is important to approach the credit reference agency in order to correct the mistakes and errors, this may not be beneficial, or even the end of the matter. In order to correct the information on a person’s file, the credit reference agency will approach the loan company or credit card provider to which the incorrect information applies and ask for a full history of the account.

If the loan company holds correct details about your loan or other credit agreement, this will be forwarded to the credit reference agency, who will then be able to update your file appropriately. This could usually take up to around one month to complete the process.

However, in many cases it is the loan company or credit card company who are the ones holding the incorrect information about your particular loan repayments. If this is the case, then the information they return to the credit reference agency will be wrong and just go to confirm what the original report already said. This could actually make a person’s report look even worse and reduce their score even more.

It is therefore vitally important to not only contact the credit reference agency which holds the information, but also to get in touch with the loan or credit card company who may have inadvertently provided the false information to them in the first place.

It is quite possible for personal loan and credit companies to make errors and mistakes on their files and they will do everything they possible can in order to correct any mistakes and clear up a borrower’s credit file as quickly as possible.

In many cases this can be sorted out by telephoning the company in question and the problem can be rectified during the course of the phone conversation. In other cases, they may require additional information, such as copy bank statements, for example, showing that the loan repayments have actually been made on time.

The corrected information will then be forwarded to the credit reference agency concerned, who will then update their records accordingly.

As we have previously said, personal loan and credit card companies rely on the information held within a person’s credit file and if this is incorrect it can adversely affect that person’s ability to get the loan they require. It is also important to remember that it can take some time to fully correct a credit file which holds false or incorrect information on an individual.

Therefore, if you are planning to apply for a new personal loan, credit card, or any other type of credit agreement, it is well worth checking your credit file a good couple of months before you actually intend to apply for it. This way, if there are any errors showing up on it, you will have plenty of time to have this corrected and then hopefully be accepted for your new personal loan straight away without any problems.