Whenever you make any kind of application to borrow money, lenders will invariably check your financial credentials with their chosen credit reference agency to see whether you are a good or bad credit risk. There are three main credit reference agencies collecting information on us: Equifax, Experian and Callcredit. Lenders will usually ask one or two of them for the information they hold on you and most of them use Equifax or Experian as CallCredit is a relatively new credit reference agency.

Credit reports include details of the electoral roll, court judgments, bankruptcies, your current and past credit commitments and whether you have missed or defaulted on any payments over the last six years. What your credit report says, therefore, affects your ability to borrow money at reasonable interest rates or even to borrow money at all.

Multiple applications over very short period of time can, therefore, look very suspicious to a prospective lender. So can having several dormant accounts or lots of credit cards with, collectively, large amounts of credit available for you to potentially go on a spending spree. Lenders may also interpret an abnormal number of credit searches as evidence that you may have been a victim of fraud.

Searches cannot go ahead without your agreement so when considering making an application, make sure that you ask for a quotation rather than giving a prospective lender permission to make a full search. A quotation does not normally necessitate a search of your records and, if it does, it should show up only as a quotation search, which will not affect your chances of being given credit in the future.

When a credit check is run on your file, the searcher sees exactly how many credit cards you've got, the total amount of credit that's available to you and the balances you've got on each of them. Crucially, they can also see how many applications for credit you've made although they won't know whether you've been granted or refused credit. You could, for example, have simply decided not to proceed rather than being turned down because you've got too much credit card debt.

You should, at any rate, regularly check your credit reference files yourself so you can see what the searchers are seeing. It will also help you spot if anyone is fraudulently using an old account or using your name to open new ones. The main credit reference agencies are Experian and Equifax and you should check them both if only to confirm that the information they hold on you is correct.