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Credit Rating: How they work it out and how you can get your credit report for free There is no one fixed credit report file, each lender rates you based on its own criteria.  This article detail how to maximise your chances of getting credit, and, how to find out what they know about you for free.

Will they to lend you money?

Credit Scoring
Try to borrow money, or sign up for a credit card, depends on how you compare against the lender's own requirements, using a method known as credit scoring. 
Credit scoring is an attempt to predict your behaviour from all the information available out there about you.  Their actual scoring systems are different from company to company and for the different products they offer. The methods companies use to actually create your report are kept secret, importantly, just because one company accepts or rejects you, it doesn't mean another will. 

Why credit ratings don't exist.
There is no single credit report; no single assesment of your credit risk.  There also no such a thing as a credit blacklist.  Instead, every institution gathers information about you, as it sees it, to decide to lend to you the money based upon that credit information.  The credit blacklist idea exists because the information about you credit companie's use is from the similar sources, so if one lender considers you a bad risk the chances are another company will also. 

How they get there credit info about you. Three prime sources of information are used to determine your report.
The application form.   
Often it is the primary source of information, as lenders obtain details of your annual salary, family size, reason for the loan and whether you're a home owner. 

Past dealings with the company. 
Where it's allowed (and complicated data protection rules govern it) companies use any previous dealings they've had with you to help assess your behaviour. 

Credit reference agency reports.
There are three credit reference agencies, Equifax, Experian and CallCredit.   All lenders use at least one when assessing your credit report.  These companies compile information, allowing them to send data on any UK individual to prospective lenders. 
Their main sources are:

Electoral roll information.  This is publicly available and contains details of people's addresses and of who lives with whom.

Court Records.  County Court Judgements (CCJs) and Bankruptcies are used to indicate if you have a history of debt problems.

Financial Data. Banks, building societies and others compile details of all your payments and transactions. Around 300 million records a month are tracked.

When credit ratings do exist!
Some, perhaps 30% of lenders, do utilise a 'credit rating' prepared by one of the credit reference agencies as part of their credit scoring process.So when they ask for info rather than getting a data sheet from Equifax or Experian, they get a report too.  This is report isused in along side their own application form information, past dea lin gs and other info, to build their final credit report. Yet still remember that every lender reports you different ways. The 'credit report' is one piece of your credit jigsaw puzzle and not the be-all and end-all.  This is especially true of those you if have an existing relationship with (previous dealing data) a company, as that is always a very important fact.  

ITS ALL About Profit
Credit reports aren't solely about good or bad risk, but whether you're likely to make that institution money. 

Risk is a part of this, as of course if you're unlikely to repay, you're an immediate risk to profits.  However, rejection letters may arrive at the door of even the most solvent; lenders try to predict not only whether you'll pay, but whether you will act in a way they approve of. 

For example, credit card companies may reject applicants simply because their history predicts they will repay their debts in full every month and that isn't profitable.  Yet it goes further.  Credit scoring is used to build up the 'right' customer base.  It's a 'wish-list', allowing them to weed out the customers least suitable for their business.

This can have complex implications.  For example, bank current accounts are often used to draw in new customers so that other products may be cross-sold.  Thus if the idea is to bring in new customers via a current account to flog'em a mortgage, then some unsuspecting people may be turned down as they're not suitable for the mortgage, not the current account.   

Experian. Experian Consumer Help Service, PO Box 8000 , Nottingham , NG80 7WF

Equifax. Equifax PLC, Credit File Advice Centre, PO Box 1140 ,Bradford ,BD1 5US

CallCredit. Callcredit plc, Consumer Services Team, PO Box 491 , Leeds , LS3 1WZ

IMPORTANT! Don't pay more than statutory £2.  These site's will try to flog you more advanced credit reports, but see later for how to get those credit reports free. It really is worth checking your file with at least the big two agencies, Equifax and Experian, every 18 months or so (it doesn't impact your credit report) as bad data on you can cause many problems and it's far better to catch it before you make any applications.

This is the real credit reference error nightmare scenario:
You apply.  You get falsely rejected due to an error.  You apply elsewhere. You get rejected again.  This continues, until finally you check your files and get the error corrected. Now when you apply you're rejected again, not due to the error, but because of all the recent searches. 

This means there's a golden rule.  If you're rejected once, immediately check the files are correct, otherwise you may mess up your report for an age.  You'll be told by the lender which credit reference agency it used to assess your info, so that should obviously be the focus of your check. It is possible after an error to get successive searches wiped, but it involves negotiation both with the agency and the lender and isn't easy.

What to check on your credit report? Everything!  There's the obvious stuff, such as are all your debts correctly listed? Are there any inaccuracies on your repayment history?   Yet other details are important too. Check your present and past address details. Errors here can lead to you being judged on someone else's credit history. Also your finances may be incorrectly linked with someone else's. 

What if there's an error? If you disagree with anything on your file, write and request it's changed. If the agency agrees with these or any other amendments it should quickly change your file though sometimes you'll need to talk to the company that originally filed the error. Unfortunately sometimes they may refuse to amend your file.  If this happens you're entitled to add your own comments to the file as a 'notice of correction'. This will often mean your credit applications take longer, but it may help you to obtain better credit.   Don't go on too much in the explanation, and don't overly berate. Be concise, explanatory and factual.

Once, credit reference agencies contented themselves by profiting from selling our data to companies, and providing consumers with info was an enforced headache. Sadly, some bright spark recently decided to profit from us too. Now there's a whole world of 'credit report selling'.

Get it posted for £2.  This is a statutory right as detailed above.

Buy your 'credit report/rating'.  Credit reports are secret, so it's strange that companies purport to sell them. You actually get a rough estimate of your generalised risk profile (see 'your credit rating' above) usually based on one agency's data.  Never be fooled into thinking this has a solid meaning with individual lenders though.  This is only really useful for saving time in highlighting major credit history flaws.

Credit Monitoring Services.  This is the holy sales grail for the credit reference agencies, to flog you on a monitoring service providing regular updates of (and I think this should be said with the voice of the Muppets 'Pigs in Space') 'how your credit report is doing'. It's an entirely unnecessary expense (around £60) for most people.