Credit Scores Explained
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
Credit Scores Explained
Summary
Recent research indicates that frequently applying for loans and credit through comparison websites can potentially harm your credit score. Approximately 8.7 million people have used these sites to purchase financial products like loans, credit cards, and insurance in the past year.The Impact of Comparison Websites
While comparison websites are popular for finding the best deals, they often focus more on price than on service quality or product suitability. This can lead consumers to apply for financial products that aren't a good fit, resulting in a high number of rejections.Understanding Credit Footprints
Rejections themselves don't appear on your credit report, but every application leaves a "footprint." According to Experian's consumer affairs manager, all your credit applications from the past year will show up on your report. Multiple applications may suggest that you're overly reliant on credit, or worse, it could seem like fraudulent activity.Statistics and Solutions
MoneyExpert.com, a financial comparison site, reports that 2.8 million people have applied for 3.5 million products last year. About 6% were rejected for credit cards, mortgages, and loans. To address this, the site launched a credit profiling service that matches consumers with suitable lenders based on their credit ratings, leaving no footprint on their credit histories.Industry Recommendations
Financial experts urge comparison sites to adopt similar services and warn customers about the risks of multiple applications. Websites should also enhance transparency regarding fees and charges, and not solely focus on pricing.Managing Credit Refusals
A credit refusal isn't the end of the road. If a computerized credit scoring system turned you down, you can request a review. Most major lenders rely on credit histories from Experian and Equifax, which gather data from various sources such as:- Agency records
- Electoral register
- Court judgments
- Bankruptcy records
- Credit payment history
- House repossessions
A high number of credit checks will be noted in your report, affecting decisions from lenders who use their criteria for granting credit.
Steps to Take After a Rejection
If turned down, it's important to verify your credit history for errors. Within 28 days of being rejected, ask the lender for the credit reference agency they used and request your information from the agency for a small fee. Ensure you provide:- Full name, address, and previous addresses for the past six years
- Business name and address if applicable
The agency must respond within seven days. If corrections are needed, you can request changes or add notes to explain specific periods in your history.
Beware of Credit Repair Scams
Exercise caution with companies claiming to repair credit for a high fee. You have the right to request a copy of your credit file from credit companies, and the Information Commissioner’s Office can offer guidance on managing your credit history.You can find the original non-AI version of this article here: Credit Scores Explained.
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