Page 67 - Benjamin Franklin\'s The Way to Wealth: A 52 brilliant ideas interpretation - PDFDrive.com

29 KNOW THE SCORE

‘Creditors have better memories than debtors,’ observed Franklin. These
days it’s not so much about memory per se as records. Your personal
tally takes the form of your credit rating.

Fortunately it’s no longer so hard to get a peek at your credit rating.

DEFINING IDEA…
Lenders are increasingly using risk-based pricing to make loans. If
you don’t find out your credit score, check your credit report and
correct mistakes, you’re going to be totally in the dark, and run the
risk of paying far higher interest rates…
~ KEN MCELDOWNEY, DIRECTOR OF CONSUMER ACTION

Credit reports are financial records kept by the credit reference agencies
(like Experian, Equifax and Callcredit) to help lenders decide whether
you’re a good risk or not. This is done with your consent (it’s in the small
print when you apply)and the information is available for you to check at
any time. The report is personal—it doesn’t include details of your wayward
brother unless a formal financial link has been made and, despite what we
all once believed, there is no blacklist. In fact, credit reference agencies
don’t give you a credit score at all.

That’s done by individual lenders who assign their own points system to the
information on the record and tot up the total to achieve a ‘pass’ mark on
which they base their decision. Different lenders have different points
systems, so one might decide to give you credit and another could refuse
you—though both use the same information. You might also be offered
credit at a different rate to your mate who applied for exactly the same
thing. A look at your credit report should help demystify the dark workings
of the lenders.

Nor is a ‘no’ the end of the story. You can ask a lender about the way they
tot up a credit score and if you are refused they should tell you why. These