What is a credit reference file and why should Students care

Subject page : Money Matters

If you apply to obtain a loan, credit card or enter into a credit agreement, you will need to complete an application form. Each application is registered on a file and this file is known as your credit reference file. Even if your application was unsuccessful or the deal you were applying for is 0% credit your application will still be logged.

In Britain these files are kept by three credit reference agencies – Call credit, Equifax, and Experian these agencies are contacted by anyone considering giving you credit. The information held on your credit file is reviewed by those considering lending you money. If your information shows that you have had miss payments or been refused credit in the past this will have a negative effect when your application is assessed.

The three credit reference agencies do not have a credit score or credit rating in your file neither do they have the power to determine whether or not your application is successful. The lenders simply use this information to assess whether they deem you suitable to lend money to. Each lender will have their own methods to calculate and access this information one important thing that most lenders will check is whether or not you are on the electoral roll. This information tells the lender whether you have a Permanent track able address which is imperative for them when lending money to anyone.

Some lenders use the information on your credit file to assess what level of interest to offer you. If you score highly with them you can been seen as a good risk and get a low interest rate. If you have a high credit score they might offer or a very low or even 0% rate of interest and someone with a low score is offered an interest rate at 18%. In practical terms this means that someone could purchase a Porches’ for the same price as a Ford because the repayments could work out to be the same.

On average students are leaving higher education establishments with a debt of over £20,000. This coupled with any bad credit you might incur whilst studying could easily in the future cost you several more thousands when wanting to move on in life and purchase items such as your own home. It’s therefore imperative not to be careless in this financial climate where borrowing money is more difficult and expensive and spend a little time to keep a track of your credit profile.

Author:  Sonia Michelle
Added:  09 Jun 2009