C
Capital
A sum of money. It can describe a lump sum investment or
a lump sum loan. The capital is the amount you have invested
or borrowed as distinct from any return you may get from an
investment or any interest you may be required to pay.
It is used throughout the term of a mortgage to describe
the amount outstanding that you owe, excluding costs and interest. [Back to top]
Credit - your record
These days having a less than perfect credit record or an
irregular income should not stop you from taking out a mortgage
or getting access to other borrowing. Recent research reveals
that about a quarter of the population would be refused credit,
showing that it is not a problem confined to the minority.
If you have had credit problems in the past don't immediately
rule out the high street lenders. They say they take each
case individually and would consider someone with a County
Court Judgment (CCJ) for non-payment of debt, if it was for
a small amount and had been cleared some time ago. But if
you are refused credit, lenders don't have to tell you why.
Both a CCJ and a bankruptcy order are held on a person's
credit record for six years. CCJ's can be withdrawn from your
file if they are cleared within one month. It is worth knowing
that you could unaware that you have a CCJ on your credit
record, perhaps caused by a bill being unpaid if it was sent
to an old address.
When you apply for credit, lenders check your credit record,
called credit scoring, with specialist credit reference agencies
that collect information from the courts, lenders and the
electoral roll.
If you feel you there has been an error made in your credit
scoring you can obtain your credit file, ask for an investigation
and, if proved correct, have your record altered.
Beware of so-called credit repair companies, especially if
they try to offer you loans at high rates of interest. If
that happens steer well clear. [Back to top]
Credit History
Your Credit History is a term describing your record of taking
out credit, and just as importantly, repaying it. Your credit
history is held on your credit file by a credit reference
agency and is used to assess your risk level to a lender or
other credit provider. [Back to top]
Credit Scoring
A system used by lenders to calculate the statistical probability
that a loan they grant to you will be repaid. Different lenders
have slightly different rules for assessing risk. Each lender
works out the characteristics of 'good' and 'bad' customers,
based on its past experience. Homeowners or borrowers with
steady incomes may be considered less likely to default.
Each answer you give on your application form will be given
a rating. If the total 'score' is above a certain figure,
your application is accepted. Because credit scoring is the
key to different lenders risk management they do not easily
reveal the precise details of how it works.
Every score is individual and calculated using a mathematical
formula that evaluates all types of information on your credit
report, compared to information patterns in millions of past
credit files. The score can then identify your level of future
credit risk.
If you have been refused credit, you are entitled to know
whether a credit reference agency was consulted (and be given
their contact details) as well as whether or not your credit
report adversely affected your application. If you are refused
credit, under the Data Protection Act 1998 you have the right
to ask that your application be assessed manually. Although
you have no legal right to credit or to a detailed explanation
of why any application you make is turned down, credit industry
codes of practice do encourage lenders to at least tell you
the principal reason behind their decision.
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