The benefits of checking your credit

When making a lending decision, financial institutions care mostly about one thing; that the applicant will pay them back without much trouble, beyond that, they'd like to issue as many loans or credit cards as possible.

To make the lending decision, they partly rely on credit history information they receive from credit reference agencies; these are independent entities that collect data from as many financial institutions as possible and use it to compile a credit history for an individual.
Your credit history will come into existence once you've turned 18 and have registered on the electoral roll or have dealt with a financial institution; credit reference agencies never ask for your consent, in fact most people won't know that they exist.

Where to check
The 3 agencies in the UK are Experian, Equifax and CallCredit, they're by law required to provide you, on request, with a statutory credit report for a small fee of £2. You can request yours from each below:
- Experian Statutory report
- Equifax Statutory report
- CallCredit Statutory report

On top of that they also offer instant credit check services for a monthly subscription fee; however, for most people a single annual check will be sufficient.

Benefits

1. Gives you a chance to correct mistakes:
Credit reference bureaus get their information from various sources, they take the information they get as accurate unless revised by the original source or disputed by you. An example mistake can be a financial institution reporting debt as unpaid whereas you know you've paid it off.
In such cases you can call the reference agency and dispute the reporting; often they're willing to work with you to correct the mistake.

2. Can alert you when you've been a victim of identity theft:
It is very difficult to know when someone has taken a copy of your details; the methods used often leave no evidence. But in most cases the aim of identity thieves is to use your details to apply for something, if it happens to be a financial product e.g. a credit card or a loan, more likely it will show up on your credit report. By accessing your credit report regularly, you can identify things that you did not sign up for and report them as fraudulent.

3. You'll have a good idea what you can qualify for before applying:
When you get a copy of your credit report, it gives you an idea where you fall; there are those with very good credit, fair credit and those with bad credit. If you find that you have good or fair credit, then you know you have a chance of qualifying wherever you apply.
But if have bad credit, it might be detrimental to apply at some high street banks; a rejection creates an unnecessary credit inquiry, which other lender will be able to see and therefore damage your chances with them.

4. It puts you in a better negotiating position:
Sometimes when getting a loan, the lender can make you feel like they're doing you a favour, thereby convincing you to accept the first offer you get. In reality, most lenders only approve once they've realised you're a good potential customer.
If you know in advance that you have good credentials, getting approved does not feel like a favour and you can negotiate for a lower rate knowing that other lenders would also be happy to have you as their customer.