Lift the credit cloak for a better financial outlook

If you have just five minutes spare today, then I suggest you use it wisely to discover more about yourself – well financially at least.

I am not suggesting you dash out and buy one of the many self-help books available. Just as useful, and a fraction of the cost, is to get hold of a copy of your own credit file.

You are probably aware that some rather shadowy organisations keep detailed records about your financial history, which are accessed by banks, credit card companies, other lenders and even mobile phone companies every time you apply for credit.

Although it all sounds very cloak and daggers, it is perfectly easy to get hold of this data. Three main credit agencies (addresses below) will send you a copy of your credit file by return of post for the princely sum of just £2.

There are two good reasons why you should keep a regular check on these records.

The first is to give you some idea of your "credit worthiness". These files should contain information on all the credit agreements you have had over the past six years. So credit cards, loans, mortgage will be listed, along with details of your payment history. Missed or late payments will be flagged and will trigger alarm bells with prospective lenders. More serious debt problems – such as country court judgement or a previous bankruptcy – are also recorded.

Those with a more chequered history will find it difficult to get loans or credit cards, at least at a competitive rate. And in the current economic conditions, all evidence suggests that lenders are becoming far more stringent on who they grant credit too. Just one or two late payments – even several years ago – could count against you.

Remember it is possible to place a "notice of correction" to your file giving further explanation, if for example you ran into debt problems following divorce or redundancy.

But even those with a perfect payment history may still not qualify for the best credit deals. Again a peek at their credit file might provide some answers. Every time you contact a lender to enquire about credit it leaves a "footprint" on your file, even if you proceed no further. So multiple credit applications can be counter-productive: too many footprints may signal you are about to take on large amounts of debt.

But requesting a copy of your credit file can also be a useful guard against identity theft. It will highlight if anyone has obtained, or attempted to obtain, credit in your name. If this has happened then you need to contact your bank and credit card providers, as well as the relevant credit agency. They should be able to expunge fraudulent applications from your record.

There is no question that incidents of identity theft are rising, but so is people’s fear of this crime.

And it is not just the high-tech fraudsters that are looking to make a quick buck. No, I don’t mean British banks and building societies are secretly cloning your personal data and selling it on to the criminal underworld (though it would certainly help if Government agencies and financial institutions were a little less careless with lap-tops, CDs etc). But financial institutions are marketing expensive insurance on the back of these fears. Even the credit agencies themselves are also promoting "active" monitoring services, which cost at least £10 a month. (In essence they email you if there is any change to your credit file). In fact if you look at some of their websites you could easily overlook the £2 option.

The consumer group Which? claimed these insurance policies were among the most useless financial products you could buy – and I am inclined to agree with them.

For starters banks and credit card companies are legally obliged to investigate all cases of ID fraud, and where necessary reimburse customers. Don’t be mistaken for thinking that an insurance policy would automatically pay-out or offer compensation. All you are paying for is a dedicated investigation team, which most major banks and building societies will have anyway.

So save yourself some money and keep a watchful eye on your finances yourself. Get a £2 copy of your credit file and check all banks and credit card statements regularly. If you see an item that you don’t recognise report it straight away. And don’t let any institution fob you off with excuses, such as you must have revealed your PIN. If you know you didn’t then stick to your guns – quote this article at them if necessary – the law is on your side.

By EMMA SIMON

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