Credit check, Credit history, Credit score
Payment Protection Insurance (PPI)
Overdraft limit on a current account
Car finance and Logbook loans
Pay day loans and Pawnbrokers
What is a Credit Check
A Credit Check of your financial credit report and history is generally required by money lenders, credit or service providers upon applying for a loan, credit or a service that requires financial agreement with you. This also used as a security check against fraud, arrears and insolvency. Most commonly credit checks are required for opening a bank account, loan or credit applications, services contracts (phone, internet etc.), installment purchases and occasionally for property rental.
Credit Report and History
Your credit history is built by companies you are in a financial agreement or contract with. They report monthly to Credit reference agencies of your payment status, whether your account with them is up to date or how much your arrears are, if any.
For example you have a mobile phone contract, your phone service provider will send your payment status to a credit reference agency.
Your Credit history shows your financial commitments in the last 6 years. It shows where you live and have lived in the past and whether you are registered on the Electoral roll. Also shows what companies you have or had credit or payment obligations with and how much you pay, how much arrears you had in the last 6 years, as well as credit checks made by companies when you applied for a service, loan or credit applications in the last 6 -12 months whether they were approved or not.
Your credit history summary is your credit score, which indicates your credit rating with a number based on your last 6-year credit status.
You can increase your score for example, you have a credit card and you use it moderately, but you do not spend all of the credit on it and you pay it promptly every month. You can also increase your points by registering on the electoral roll and not applying for credit or loan often within 6-12 months.
How to check your Credit Report
Every Credit Reference Agency is statutorily obliged to give you a copy of your credit report for £2. The main agencies are www.experian.co.uk; www.callcredit.co.uk; www.equifax.co.uk
You can also check your credit report online from £15/month. First month is usually free as a trial period. You can cancel it at anytime.
Payment Protection Insurance (PPI)
When you take out a loan or credit card, you will be offered Payment Protection Insurance (PPI) which will cover the cost of your monthly repayments of your credit card or loan in case you have been made unemployed or affected by an accident or illness. It is not mandatory to have this insurance. Your loan applications will not be affected by it.
If you already have a current account, you can ask your bank for an overdraft limit, this allows you to borrow money up to an agreed amount. Overdraft limits usually starts at £250 depending on your credit score. You can apply online, over the phone or in person at your bank.
Using a credit card may increase your credit score. You can apply for a credit card using your own bank or other credit card companies. A good comparison site to use if you are looking for a credit card is www.moneysupermarket.com
Personal Loans (Unsecured Loans)
Personal loans are available at any bank or other lenders. They are not secured against any asset e.g. your home. Generally the amount you can apply for is between £1000 to £35 000. The amount also depends on how much you earn and your credit score. All lenders must be registered with FCA – Financial Conduct Authority. You can compare loans and interest rates at www.moneysupermarket.com
In general you can apply for a car finance if:
You have been living in the UK for at least 3 years
You are over 21 years of age
You have a British driving licence
You work full time and have a salary of at least £750/month
You have a bank account with a Direct Debit facility
You are not bankrupt and have not had a Court Judgement in the last 6 years
You can apply for between £1000 and £75 000, this depends on your salary and your credit score. All lenders must be registered with FCA – Financial Conduct Authority. You can compare car loans at www.moneysupermarket.com.
Logbook loans are when you temporary need to give your vehicle and your vehicle’s logbook or vehicle registration document (V5C) to the lender until the loan has been fully repaid. You can apply online or in person at car finance companies or money lenders. You can generally borrow between £500 and £50 000, depending on how much your vehicle is worth or up to half of your car’s value. You may lose your vehicle if you do not keep up your agreement.
All lenders must be registered with the FCA – Financial Conduct Authority. Look them up on Google, for example: www.logbookloans.co.uk
A Payday loan is a high interest loan that allows you to borrow money short-term until your next payday or for a maximum of 12 monthly instalments. Generally, you can apply for £100- £1500. All lenders must be registered with FCA – Financial Conduct Authority.
Compare loans and interest at www.lenderscompared.org.uk
You can pawn your valuables for cash at any pawnbroker. It is also a high-interest loan. Clarify the terms and conditions of the trade before you make a deal. All lenders must be registered with FCA – Financial Conduct Authority. The most popular high street pawnshop is Cash Converter (www.cashconverters.co.uk).