This then gives the company a picture of what sort of financial risk you will be if they decide to lend you money - and what their chances are of them getting the money back! After all, no one wants to lend money to someone who pays it back late or not at all! This process is called credit scoring.

There are several bodies who hold this information about you - the most widely known are Experian and Equifax.

If you are considering taking out credit, get a copy of your credit file first. This means that you can check that all the data on it is correct and query anything that looks wrong. For example, even just one bit of wrong information  - say your file shows an outstanding debt that has been settled - could mean the difference between getting approved for a loan or mortgage  - or not.

To get a copy of your credit file you will need to contact one of the credit record agencies. You will be charged a small fee (around £3) and a copy will be sent to you for your perusal.

Check that your credit file shows you on the electoral roll - if not, this will have a negative effect on your credit score. And financial associations - where maybe someone who has lived with you or has lived at your address previously has a poor credit rating - will affect your ability to get credit.

If you find information that is incorrect on your file, contact in writing the company who has listed incorrect data about you and send a copy to the credit record agency too.

If there is a financial association listed on your record that is not applicable, contact the credit record agency in writing.  They will send you forms to complete so that the association can be removed from your file.