Does Your Loan Qualify For a "Typical Rate"?

Most personal loan companies and around a third of credit card operators promote their "typical rates" in their advertising as a taster of the interest rates which you will be offered. But if you are out shopping for a loan, do your sums carefully and keep an eye on the interest rate. Loan advertisements usually promote their headline rate, but once your application is completed, get ready for a shock. Many people discover that the lender is proposing to charge much more, possibly even twice as much as the rate they had seen advertised.

If you apply and are quoted a higher rate and for the life of you, you cannot think why - could it be that it's your credit history that has let you down? Well not always. Sometimes this can happen because there is insufficient information for the lender to assess your credit risk. So they quote you a high rate just to be on the safe side! This is most likely to occur with young people, who have not yet had time to build up any worthwhile credit history.

Alternatively, it could be that you have not applied for credit for many years. This can happen with people who've been out of the country for some years. Commonly, men working overseas may send money home for their families to deal with and possibly it is the wife who ends up paying the bills and making all major purchases. If this happens, the wife may earn a superb credit record, but there is nothing to show that her husband is credit-worthy. Not even an electricity bill!

Of course there could be other reasons for the lender quoting a higher rate of interest. For example, a record of general bad debts, missed mortgage or credit card payments, or county court judgements. Even minor bills like your mobile phone, will affect your credit rating.

Nowadays every minor indication of stretched finances will be taken into account. Once upon a time, only larger debts were considered. But there are two sides to this. If your credit history does indicate problems, it does not automatically follow that your loan will be refused. With today's sophisticated credit scoring systems, lenders will consider your circumstances and may be prepared to offer a loan, but do not expect their best rates.

Remember, you too can check your credit record. For just two pounds the credit agencies will provide you with a copy of the information they hold about you. Most lenders use the main agencies such as Experian and Equifax.

When you receive the information, check it carefully. If there is anything which appears to be damaging your credit rating and you know there were mitigating circumstances, you are quite in order to request that a note of explanation is added to your file. This then remains in place for six years.

If you file records a large number of credit applications, it's possible that this in itself will result in a poor credit score, even if these credit applications were not taken up.

Of course, mistakes do happen. If there is a mistake on your file, you will have to draw the matter to the credit agency's attention. They will then contact the lender and inform them of the revised situation. Whilst this is happening, all incorrect information and all record of the query itself, will be removed from your record. This means that any other company checking your credit file will be unaware of it.
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