Your credit report is a very important factor in your life, even though you may know nothing about it. If you try to borrow any type of money for anything, the lender will access your credit report to see what sort of borrower you will be. Many people are unaware that this goes on behind the scenes. But if you apply for a credit card, whether it is online, over the phone, or by post, your credit report is verified before a decision is made.

Many credit card and loan companies will have a clause in the small print which is known as a universal default clause. This stipulates that if in the eyes of the company you suddenly become a bad risk, they can raise the interest rates on your borrowing without explanation to you. The companies periodically check their customers’ credit reports and if anything is highlighted or shows up as a risky development, they will act to protect their lending. This could be something as simple as you paying a bill late, or being late with a credit card repayment.

If there is a sudden change in habits, for example, if someone takes out more cards suddenly or increases their borrowing, then the company may view this with suspicion. They can build up a customer profile and any activity outside this profile means that the person may be quickly going up into the risky category.

The trouble is that any existing borrowing you may have will suddenly become hugely more expensive. After the interest is compounded, a tiny change in the interest rate can mean the equivalent of hundreds or thousands of dollars added onto the whole loan.

To protect yourself as much as possible from these sudden changes, you can do a few things. Obtain a copy of your own credit report and go through it to make sure that all the entries in it are correct. Does it still show old borrowing which you have already paid off? Does it have your correct details? Sometimes, if someone has the same name as you, their credit history can become mistakenly added onto yours.

Also, keep an eye on your credit card bills. If you notice the interest rate has suddenly shot up, you are within your rights to phone the company to ask for an explanation. They may reduce the rate if you call them and give you a better deal. If not, then there are plenty of other cards where you can get yourself the best deal that you possibly can.