The approval of our loans will typically be subject to a credit check and this will help determine your eligibility. Every individual in the UK receives a credit score and will have a credit file when they turn 18. When carrying out a credit check, the lender is able to review your file and get an indication of your financial history including past loans, credit cards, outstanding bills, current address and more.
If you have a bad credit history, this will likely impact your chances of approval. However, if you have a good credit history and strong record of past repayment, this will maximise your likelihood of being accepted.
The One Stop Money Shop carries out credit checks using Equifax to ensure that customers can afford to repay their loan without falling into financial difficulty. Carrying out credit checks is a requirement of the Financial Conduct Authority prior to funding every loan and is key to lending responsibly.
Accesses data from a credit reference agency
Your credit file is held by the three main credit reference agencies in the UK of Experian, Equifax and Call Credit. Every time a lender conducts a credit check on your account, they are paying a small fee to one of the credit agencies in order to access this information. Some key information from credit reference agencies includes:
Updated in real-time: Your credit information is updated automatically and this is very important to other potential lenders. So if you are making numerous loan applications in a short space of time or have recently been funded for multiple payday loans, this information will be updated immediately and be made available by other prospective lenders who will use this information to make informed decisions. Naturally, if you have just been granted numerous short term loans and are continuing to make applications, future lenders may be hesitant.
Recent payments: Your information on recent payments will be recorded and is made accessible via credit reference agencies. So if you have made a recent repayment on time for a financial product, this will improve your credit score or keep it strong and healthy. Equally, if you have just missed a repayment and are in arrears, this information will be made available to future lenders.
Outstanding debts: Any future creditors will be able to see what outstanding debts you have available. It is very normal to have loans or credit cards open, especially mortgages, since these can last 10 or 25 years. It is the role of the direct payday lenders that you have applied with to determine your affordability and how much you can borrow without falling into default. Lenders might be cautious if you have a history of defaults, IVAs or CCJs – but some lenders including The One Stop Money Shop are willing to take a view – see CCJ Loans for more information.
How lenders use your credit information
Lenders will look at your information and determine if you are eligible for a loan. From their perspective, they want an indication as to whether you will be able to repay on time and the lender can make back their investment. The One Stop Money Shop will use a credit check to confirm:
- Your eligibility
- The amount you can borrow
- How long you can borrow for
- Interest rate and potential risk of default
Credit checks leaves a footprint
When you apply for a financial product such as a loan or credit card and a credit check has been run, it will leave something on your file known as a search footprint. This is a like a mark or stamp on your file to confirm that someone has looked at your file.
It is important because having too many search footprints within a short space of time can make you look financially stretched or desperate for cash – or equally a potential victim of fraud if someone is applying for finance in your name. It is normal to have around 12 search footprints at any time and they will usually disappear automatically from your file after 12 months.
Some financial products and eligibility checkers will use something called a ‘soft credit search’ and this means that it checks your file and disappears immediately after. This is commonly used by brokers and loan matching tools where there is no obligation.
Check your credit file
You can see who has run a credit check on your file by accessing your credit report. This is available for you to see when you sign up to a service provided by the likes of Noddle, Experian or ClearScore. There are usually free trials available and thereafter it costs a few pounds per month. Checking your file regularly can be useful if you have been a victim of fraud and want to keep on top of things or you are proactively trying to improve your credit rating and want to monitor the score regularly. You can also receive a one-off statutory credit report for £2 via the government.
Improve your credit score
If you are worried that a credit check will show a history of missed repayments, you can do some essential things to improve your credit score. If you are young and starting out in the world of personal finance, you should join the electoral register which is free and this will confirm your address with the local authorities, something that adds credibility to your credit profile. You should also consider closing down any credit cards and store cards that you do not use and trying to get into the habit of repaying any debts, bills and loan repayments on time each month. Read our guide here on how to improve your credit score.