Credit Reports – the First Step towards Getting out of Debt

According to a recent report in the news, one in four people who needed help with debt, cited loss of income as the reason for their difficulties. With rising unemployment figures many people are experiencing financial hardship for the first time. Those finding themselves in this situation may find that obtaining their credit report is the first step towards getting their finances back on track.

As a result of the recession, lots of people are becoming unemployed for the first time or receiving cuts in pay and reduced hours. Many of those in business or self-employed are also finding that their takings are diminishing. This means that people who have never experienced debt before can suddenly find that they have a problem. When people are turned down for credit for the first time it can come as a bit of a shock and, unfortunately, once they are in this situation, it may seem that there is no getting out of it.

This is because each time an individual applies for credit, the companies granting the credit do a credit check. This can apply to a bank providing a loan, or a seller granting credit for the consumer to buy a product on Hire Purchase. Credit checks are requested from credit reference agencies, which will hold information relating to consumers and their debt situations. This information will include details of: applications for credit, defaults on a credit agreement, the number of searches made (when a company runs a check through the credit reference agency), County Court Judgements (CCJ's), and bankruptcy.

How the Consumer can Benefit

What a lot of people in financial hardship do not realise is that, when they are turned down for credit, they can ask the lender what information this decision was based on. If the lender based the decision on a credit report, then the consumer has the right to ask the name of the agency that supplied the report. They can then approach the credit reference agency in order to ask for a copy of their credit report, which can be obtained for a small administrative fee. Sometimes credit reports contain inaccuracies, omissions or obsolete information, so it could be beneficial to consumers to have their records amended.

To apply for a credit report the individual has to supply some personal details to the credit reference agency, such as name, address and date of birth. Once he receives his credit report, he should check to make sure that the information is correct and up to date. If there are any inaccuracies or out of date information, the person can, by law, ask the agency to amend or remove the information. Details of 'searches' should only be retained on record for 12 to 24 months and sometimes the information on the report will have changed since the individual last applied for credit.

If the individual is still having difficulty obtaining finance once he has taken this action, then he can shop around for credit elsewhere. However, he should be careful not to apply for credit too often as he could risk having numerous 'searches' on his credit report, which could be detrimental in the future.