Let’s be honest; credit reports sound a little scary. Even if you’ve got an impeccable credit history, anything with the word report in the title feels rather severe. They’re essential documents and can grant access to many things, from getting a mortgage to a loan, a credit card to car finance, and much more.

However, while good credit can be a gateway to those things, bad credit can be a barrier. This might be why they seem scary. The world of credit reports can also seem confusing, and you might not know what they are, who compiles them, and why they’re so important.

What is a credit report?

A credit report is an extensive history of your financial behaviour, specifically your borrowing and repayments, with information about your bank accounts, credit cards, utility bills, and mortgage, plus personal details such as your address and financial associations.

Everyone has a credit report, and it usually begins when you first open a bank account or take on credit. You can have good or bad credit depending on your behaviour. Your rating at any given time is reflected in a number score. Your report is also referred to as your credit file, and it’s a critical document, as we’ll go on to explain. 

What is a credit report for?

Essentially, your credit report is a snapshot of your financial behaviour and history. It lets prospective lenders like banks, building societies, credit card companies, mortgage providers, and more determine whether they enter into a financial arrangement with you.    

Who compiles my credit report? 

Three leading organisations in the UK compile credit reports – Experian, Equifax, and TransUnion. These are known as Credit Reference Agencies (CRAs). Their credit reports are based on information supplied to them by lenders and other sources, including banks, credit card companies, collection agencies, and governments. 

Each CRA will provide you with a slightly different credit report. They each have their own methodologies and rating systems and often receive different kinds of data from lenders. Still, the end result tends to average out and be the same.  

What is in my credit report?

As we mentioned, your credit report contains a detailed history of your financial behaviour from the time you first entered into a credit arrangement. It also includes personal information and details on your financial associations. This might be anyone you have had a joint account or formal financial associations with, such as a loan or mortgage. 

There are a few exceptions to what your credit report includes, however. For example, it doesn’t consider savings accounts, council tax arrears, or student loans. Let’s take a closer look at what does appear in your credit report first: 

  • Your name, address, and date of birth 

  • Whether you are on the electoral roll

  • A complete list of your credit accounts

  • Any credit applications you’ve made

  • Credit checks by lenders going back 2 years

  • How much you currently owe lenders 

  • Late payments on any previous or existing credit card or loan accounts 

  • Missed payments on existing or past accounts 

  • County Court Judgments made against you 

  • If your home has been repossessed

  • Bankruptcy or Individual Voluntary Arrangements

  • Financial associations like joint mortgages or loans

  • If you’ve committed fraud or have been a victim of fraud

Next, let’s look at what’s not included in your credit report:

  • Your current account balance

  • Savings accounts 

  • Your salary or wage

  • Student loans 

  • Parking or driving fines 

  • Council tax arrears

  • A criminal record

  • Medical history 

It’s worth noting that the information held in your credit report always covers the last 6 years. There are several reasons for this, but it also allows you to improve your credit history over time. 

For example, if you missed a payment and it has adversely affected your credit, it will be removed once 6 years pass. While 6 years is still a significant period, it’s definitely better than mistakes staying on your credit record forever.

What is a credit score?

Your credit report also provides a rating in the form of a numbered score. Each of the 3 leading Credit Reference Agencies in the UK has a slightly different scoring system. Your credit will generally be ranked as fair, good, or excellent on the positive end of the scale. For example, Experian ranks excellent with a score of 961-999. 

Your credit score can rise or fall depending on your financial behaviour over a given period. It’s often updated every month. 

Who looks at my credit report?

Your credit report can be looked at by any prospective lender, including banks, building societies, credit card companies, and mortgage providers. Credit providers can also include the likes of mobile phone companies and mail-order businesses if you’re setting up a subscription. 

It’s not just potential lenders who can view your credit report, however. You might be asked to share your credit report with insurance companies, car dealerships, prospective landlords, and even your employer to carry out a credit check. 

Why do credit reports matter?

Your credit report matters because of who looks at it and how it is used. Credit providers use it as one of the main factors when deciding whether to loan you money. This can be as small as a £50 overdraft or as big as saying yes to a mortgage totalling much more. 

Your credit report can also be requested by employers, especially if your role involves money or you work in the financial sector. You will also usually need to pass a credit check to rent a property as a measure of your reliability in keeping up with payments. 

Credit report checks

When a credit provider, landlord, or employer, looks at your credit report, this is often referred to as a credit check. There are different types of credit checks. It’s worth knowing the difference, as they can show up on your report and potentially damage your rating. 

A soft search – this is where a prospective lender checks your record to see if you’re eligible for credit without leaving a footprint on your file.

A hard check – a more extensive search of your credit history, which is recorded in your credit report and will be seen by other potential lenders. Crucially, too many hard checks can adversely affect your rating, as we mentioned above.

How can I check my credit report?

You have a right to request a copy of your credit report from all three CRAs in the UK. It’s possible to view yours online, and you can also ask for a written document from the Information Commissioner’s Office. 

You might want to get copies of your report from each of the three CRAs in the UK since the information they hold about you is slightly different. This will help give you the complete picture. Checking your credit report doesn’t cost a thing.

Free credit reports

The UK’s 3 CRAs have a statutory obligation to provide you with a copy of your credit report for free, thanks to the Consumer Credit Act and the General Data Protection Regulation (GDPR). 

How often should I check my credit report?

It’s good practice to check your credit report each time you apply for credit, including loans, credit cards, or a mortgage. It’s vital to do this if you don’t know your current credit score and haven’t checked your report for a while. 

Checking your own report before a lender performs a credit check will give you a good indication of whether your credit application will be accepted. This can reduce the risk of being rejected, which can damage your credit rating. 

You might also check your credit report for mistakes and any fraudulent activity, which could affect your financial status and ability to take out loans. Checking your own credit report can provide you with a snapshot of your outstanding commitments and any payments you might have missed without realising.

Annual credit report

There is no limit to how often you can check your own credit report. You don’t need to wait for an annual report, and there’s no penalty for checking it too regularly. While you can look at your credit report for free whenever you like, some services offer monthly, quarterly, or annual credit monitoring and tailored advice.

Credit report services

The CRAs and some other companies offer extensive credit checking services for a fee. These services can help you understand your report’s information and advise you on how to improve your credit score. They might also identify potential credit cards and loans that may be suitable for you. Credit report services can also combine data from all 3 CRAs. You can usually try them with a free trial, but you will have to pay a monthly fee after that. 

What if there are mistakes in my credit report?

It’s essential to contact a CRA if you notice a mistake in your credit report. A small mistake could be damaging to your credit score. It’s your responsibility to report errors to the relevant CRA, but it’s down to the agency to correct them. A CRA has 28 days from the time of your request to either remove the entry, amend it, or take no further action. If no action is being taken, you still have the option to add a note to your file explaining why you believe the entry is incorrect. This can include mitigating factors to provide potential lenders with context. This is known as a notice of correction. 

Checking your credit report for potential mistakes can also reveal fraudulent activity. Naturally, it’s essential to contact the CRA and any other relevant authorities as soon as you become aware of this.

What happens if I have bad credit?

Bad credit comes from things like missing payments, defaulting on a loan, having a County Court Judgement (CCJ) registered against you, or going bankrupt. These are just a few examples. This behaviour stays on your credit report for up to 6 years and will adversely affect your credit rating. 

It’s important to remember that bad credit can also mean no credit. For example, if you’ve never had a credit card or loan, you will have little to no credit history. You could be rejected for a credit application because there isn’t enough evidence for lenders to consider. This is more common among young people who have only just opened a bank account.

While lenders take a range of criteria into account when deciding whether to give you credit or offer you a loan, your credit report remains a significant factor. 

How can I improve my credit report?

Thankfully, it’s not all bad news for those with less-than-perfect credit. Your report and rating can be improved – just like particular behaviour can cause your score to fall, good practice can restore it over time. Previous behaviour like missed payments will also be removed after 6 years. Improving your credit score could be vital if you want to get a mortgage and own a home. 

Here is a quick list of ways to improve your credit score and report:

  • Always make your payments on time – whether it’s loans, credit cards, utility bills, or mortgage payments, pay on time and in total if you can

  • Don’t make too many credit applications at once – multiple applications, close together, can negatively affect your credit rating  

  • Register to vote – this may seem strange, but you need to be on the electoral roll to successfully apply for credit

  • Go through your credit file – and contact the CRA if you notice any mistakes or fraudulent activity

  • Check for issues more than 6 years ago – you can ask to have these removed from your file; while it should happen automatically, it’s best to check

  • End bad credit associations if they no longer apply – if you’ve had past joint accounts with anyone with bad credit, it’s essential to end this financial association by closing the account and asking the CRA to add a notice of disassociation 

My credit report

Generally, if you treat your report well by keeping your credit healthy, you won’t face any problems. Credit reports are the gateway to many of life’s milestones, including getting a mortgage and owning your home, so it’s the kind of report you want to ace if you can. 

Whether your credit is excellent or not, it’s a good idea to check your own report and follow good practice for maintaining and improving your credit score. Just think of it as a regular health check for your finances.

6 May 2021