When you are browsing loan advertisments or when you actually apply for a loan you'll see or hear the term "Credit Rating" mentioned quite often. If you've wondered what this actually is - or just want to check you understand things correctly then read the mini guide below.

What is your credit rating? If you are applying to borrow money, either via a loan, a mortgage or a credit card, the finance company will want to know a little bit about you and your history of financial trasnaction before they agree to undertake a transactio with you - it's quite normal for two businesses to check up on each other before dealing with each other, but for the general public could appear a little strange. Well is just about assessing risk. Before a bank or lender will give you any of their money, they need to calculate how unlikely it is that you will default on the arrangement. If every one of their customers paid back their loans, there would be zero risk, but unfortunately they don't! Many people miss te odd repayment & some, although not many, don't back their loan at all. So it's natural that companies want do some advance checking. Normally it's automated to speed things up - this is where your credit rating or credit history is looked at. Once the bank has seen your rating they decide if they want to do business with you. your credit history is a colection of information provided by the various financial institutions you have dealt with in the past - they sort of amalgamate their information and share it for this use. All of the banking, mortgage, credit card and loan history is available to be assessed. they can see what you borrowed and when, how much you paid back and whether it was on time amd how much you still owe.

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