With the utter turmoil of the current worldwide financial climate, securingpotential borrowers don’t realise the importance of free credit reports from one of the major credit reference agencies.

Without knowing it, your credit report might be showing information that may hinder your ability to take out further credit. Some of this may not even be your fault. Worse still, it may even show that you have been the victim of identity theft!

Those people that have applied for credit and been rejected should certainly review their credit report data from at least one of the major credit reference agencies, such as Equifax. If you have been declined credit, ask the lender who refused you which of the agencies they were using to make their decision and their contact details. Then write to them asking for a copy of your credit file.

It is a good idea to ask for a copy of your credit file before applying for more credit so that any errors, or omissions, can be corrected before you apply. This could prevent a denial, which would also be recorded on your credit file and might count against you in future application.

If you don’t already know how you can check a credit report for yourself, then it is very easy to do. The major credit reference agencies will offer a free service if you write to them and ask them for the file information and there are many online services doing the same. As an early identity theft detection method, you can also join schemes whereby you are notified when certain changes happen on your credit reference file. This would alert you to sudden huge loan applications if someone was trying to steal your identity.

The free credit reports don’t tell you exactly how the lenders are going to score you, but they give you a good basis for reviewing what they are likely to be taking into account. In addition, lenders will bear in mind other questions that they ask, such as your history with that lender, your annual household income and other details they ask you to divulge.

Your credit report won’t have details of anyone else living within your house, but it will have details of who the credit reference agency has been told are financially related to you, for example a spouse. If this information is invalid, then it can be worth getting it corrected.

As an example, if your spouse doesn’t go under the same surname as you, but has a better credit rating than you, then you can possibly improve your credit rating by identifying yourselves as being financially related.

On the other hand, if two siblings, or others sharing a surname, live in the same house and aren’t financially related, it is worth ensuring that you are not being marked as having a financial relationship, in case they have a poorer credit rating.

P.S. Watch this real case how do I get out of debt video.