The Credit History Check: What the Banks Know About You

credit score meterWhether you’re applying for a business loan, personal loan, finance on a car, mortgage or credit card, your potential lender will perform a credit check to see if you’re a reliable candidate for them to lend money to. They will perform a credit history check on you, on a credit referencing site, to help make their decision on whether to approve your finance application that little bit easier.Having an idea of what they are looking at is imperative if you want to understand the importance of your credit rating. Reputable credit reference agencies provide up to date information online; here you can see your credit history for yourself and see what the banks and finance providers see when they perform their checks.

There is no universal list that can help you understand what the banks look for when considering finance approval. This also means that there is no blacklist. While one provider may decline your application, another may be happy to go ahead with the lending. Banks use a range of information from various sources, with their decision being based on three primary components:

  • The application form, which will include information regarding your address, postcode, salary and whether you’re a homeowner. It’s imperative that you ensure all details on that application form are accurate and correct. Even tiny mistakes can cost you the approval.
  • If you’ve dealt with the finance company before, this may be looked at. If you’ve been a reliable borrower in the past, this will go in your favour.
  • The credit reference agency files are a bounty of information for the banks, including electoral roll details, court records (CCJs, bankruptcy etc.), search data (who else you may have applied for finance with recently), address and link data (who else you may be connected with, such as a spouse) and fraud data.

They will also consider information regarding account data, which helps them to see what sort of borrower you are with your other finance providers, such as utilities, credit cards, and your mobile phone account and store cards. Shared data will also flag up any default payments you may have had with phone and energy providers.

The lender will use this information to generate a score and if they deem you to be a reliable borrower, you will likely be approved your finance. The decision is usually computerized; taking everything the system has access to into account to provide an accurate credit history check.

The better you are with your money, the higher the chances of a successful application. Even if you have damaged your credit score in the past, now is an ideal time to start building it back up again.

This is a guest post by Ivan.

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  1. June 13, 2013 at 6:37 am — Reply

    Interesting how one company might decline you and another might approve. Wonder how often that happens in the industry.

    • September 1, 2013 at 3:16 pm — Reply

      I think it happens more often than not.

  2. June 13, 2013 at 7:57 am — Reply

    To DC’s point, I think this can happen somewhat regularly as it would depend on how much risk the given bank would choose to take on. What one might view as a bad risk the other would be just fine taking.

    • September 1, 2013 at 3:17 pm — Reply

      I agree with you there John.

  3. June 13, 2013 at 8:17 am — Reply

    I have had a bank ask why I was not on the electoral roll, as a foreigner I had no idea I could in the first place but had to join it, it is important for a loan application. And when you move you need to make sure they take you off, even if they say it is automatic when you sign up elsewhere, it didn’t work.

    • September 1, 2013 at 3:17 pm — Reply

      Hmm… Interesting Pauline. Thank you for sharing.

  4. June 13, 2013 at 9:22 am — Reply

    As you say, the important thing is making sure you have good money habits to begin with. Many people try to focus on “tips” for improving your credit score, but the reality is that a strong history of managing your money well in all of the typical ways will get you as far along as possible. With that said, if you’re able to handle a credit card you should likely do so for this purpose. It helps build a reputable history of paying off your debts (paying off your bill in full still counts as paying off debts. Don’t carry a balance. It doesn’t help).

    • September 1, 2013 at 3:18 pm — Reply

      The tips are really just simple things that everyone should be doing. It takes time to improve your score, but there is no magic bullet.

  5. June 13, 2013 at 9:26 am — Reply

    We’ve had one company report that our credit scores are different than another company, within 2 days of each other. That was weird..

    • September 1, 2013 at 3:18 pm — Reply

      It depends on what agency they pull the number from. Each credit reporting agency creates their own score.

  6. June 13, 2013 at 11:41 am — Reply

    The key is paying everything off, keeping your lines of credit, and keep the usage low. I think if you do these things, the scores will come in high enough for you to qualify for the best rates in most cases.

    • September 1, 2013 at 3:19 pm — Reply

      I agree Greg. That is the formula for a good credit score.

  7. June 13, 2013 at 12:08 pm — Reply

    I agree with Greg. As low as your balances are low and you have timely payments you shouldn’t have an issue with any bank.

    • September 1, 2013 at 3:19 pm — Reply

      Yep, that was spot on.

  8. June 13, 2013 at 2:13 pm — Reply

    I’ve always found credit reports mysterious and frustrating – probably because I have crappy credit and always have (long story). Sometimes it seems there’s conflicting information regarding how to improve your score or what lenders factor into their decision to approve or disapprove a loan.
    However, I find it encouraging that while one lender may not approve an application, another may look at the same information and move forward with financing. While it will take me awhile to fix my credit, I might not have to wait quite as long as I originally thought given that every lender will be different.

    • September 1, 2013 at 3:20 pm — Reply

      The only thing you can do is work on improving your credit score and then it will all fall into place. Good luck Lindsey.

  9. Jake @ Common Cents Wealth
    June 13, 2013 at 2:54 pm — Reply

    This is a nice breakdown. Credit scores can be really tough to understand and explain, but it all comes down to if you use credit and pay all of your payments on time. Most of the time that results in a pretty good score.

    • September 1, 2013 at 3:21 pm — Reply

      Maybe you don’t have to understand the credit score, but just create a good financial portfolio and you will be OK.

  10. June 13, 2013 at 3:38 pm — Reply

    We order our credit report every year just to review it and make sure everything is accurate. The bank can find out everything they need to know from your credit report so it’s important to make sure it’s accurate. Like you point out where one might deny another might approve. It just depends on how much risk they are willing to take.

    • September 1, 2013 at 3:21 pm — Reply

      We do the same thing Mr. CBB. I also make sure and get one before I am about to buy something big.

  11. June 13, 2013 at 9:20 pm — Reply

    Watching your credit is important but also making sure you don’t purchase everything you have on credit is important as well. With good saving habits you will have to rely less on being approved for credit. Yes, most people have a home, and you want to be able to hook up utilities but just overall good budgeting is the best way to keep your credit in good standing. It can also help to go to a more ‘local’ bank if you are struggling to get a loan. Smaller banks occassionally have a more personalized focus and might still manually underwrite loans.

    • September 1, 2013 at 3:23 pm — Reply

      I purchase everything I have on credit, but I have the cash to pay off the credit. I have done it this way my whole life. Yes, I was in a lot of debt, but I always had an excellent credit score throughout. It is all about making sure you pay your bills on time.

  12. thepotatohead
    June 14, 2013 at 12:37 am — Reply

    If you are trying to keep track of your credit score, a good bank to belong to is PSECU (Pennsylvania State Employee Credit Union) There’s a bunch of things that can qualify you for acceptence, including just buying a $10 membership to the PA parks association. They give you free monthly updates on your credit score. They give you the FICO score which lenders use for mortgage scores, so no guessing on what your score actually is from the various reports out there.

    • September 1, 2013 at 3:24 pm — Reply

      Thanks for the tip. I use Alliant Credit Union and get the same thing. I didn’t know you could become a part of an Employee’s credit union just by buying a park association membership.

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