Why should you get a free credit report from Experian or Equifax?
Your credit report is a record of your past borrowing and repaying, including information about late payments and bankruptcy. The term "credit status" is used to reflect your ability to manage borrowing.
When you fill out an application for credit from a bank, store or card company, your information is forwarded to a credit bureau such as Equifax or Experian. These bureaux match the name, address and other identifying information on the applicant with information retained by the bureau in its files.
This information in your credit report is used by lenders such as card companies to determine an individual's credit worthiness; that is, determining an individual's willingness to repay a debt. The willingness to repay a debt is indicated by how timely past payments have been made to other lenders. Lenders like to see consumer debt obligations paid on a monthly basis.
The other factor in determining whether a lender will provide a consumer loan is dependent on income. The higher the income, all other things being equal, the more credit the consumer can access. However, lenders make credit granting decisions based on both ability to repay a debt (income) and willingness (the credit report) as indicated in the past payment history.
These factors help lenders determine whether to extend credit, and on what terms. With the adoption of risk-based pricing on almost all lending in the financial services industry, your credit report has become even more important since it is usually the sole element used to choose the annual percentage rate (APR), grace period and other contractual obligations of the credit card or loan.
Even your postcode can impact on your credit report – affecting your ability to get cheap loans and credit. Using information from many sources, including geodemographic databases, census data, questionnaires and government statistics, you can find out about the people who live within a postcode, based on tribal class; whether they are likely to live like a prince or a pauper; their average credit rating, house prices, family composition, educational levels and the socio-economic groupings of residents; how they travel to work, their ethnic origin, employment status and much more.
