Understanding Your Credit Report

by - Last Updated on July 7, 2017

Feeling a little out of your depth in the financial world? Anything to do with money can get complicated fast. And if you’re looking to borrow money, or sign a contract that involves lending, such as a mobile phone contract, then credit reports have to be top of your list of complications. But what is a credit report? What does it do? How can you check yours? What if there are mistakes? We’re here with everything you need to know about your credit report, so look no further!

What is a Credit Report?

A credit report is kind of like a CV for your finances. A good credit report shows that you’re financially responsible and means that people will be happy to lend you money, or let you sign financial contracts. A bad credit report means that people will be less likely to lend you money.

There are all kind of reasons why people would check your credit report. Banks, credit card companies, mobile phone operators, car leasing or buying agencies, mortgage companies and estate agents, maybe even landlords and employers, all might want to see your credit report. But the simple reason why they want to see it is to know whether or not you’re financially responsible.

What Kind of Info is On My Credit Report?

Info on your credit report comes from banks, credit card companies and lenders, or public sources (like the electoral roll). But your credit report doesn’t include every piece of information about you. You can find a sample of what a report will look like here. So what are you going to find if you look at your report? A credit report will include:

  • Your name, date of birth and address
  • If you are (or aren’t) listed on the electoral roll at your current address (basically, are you registered to vote?)
  • How much money you currently owe to lenders (including things like outstanding credit card balances, car payments, mortgage payments, and loans)
  • A list of any payments that have been late or that have been missed (a late credit card payment, for example)
  • Whether or not your house has been repossessed, or whether you have moved away still owing money on the house
  • Whether or not you have declared bankruptcy in the past, or signed an Individual Voluntary Arrangement
  • Whether or not any County Court Judgements (CCJs) have been signed against you

All of this information is necessary for one of two reasons. Some things (like the electoral roll) are used to prove that you are who you say you are. Other things are used to show whether or not you’re financially responsible.

However, there are also some things that do NOT show up on your credit report. Your current salary and the balance in your current bank account or the balance in your savings account are not shown. Student loans, arrears in paying council tax, any parking or driving penalties are also not shown. And a credit report is not allowed to list any medical history or criminal records.

Who Makes Credit Reports?

There are several companies in the UK that specialise in compiling credit reports. The three main credit report agencies are:

Be aware that your credit report from one of these agencies will NOT necessarily be identical to that from another, though they should be pretty similar. If you’re thinking about checking your report, it’s best to check it from each of the three agencies, since you don’t know which agency your lender uses to get reports.

Who Can See My Credit Report?

Basically, anyone who has a good reason to can apply to see your credit report. This includes banks, credit card and mortgage companies, mobile phone operators, and anyone who is thinking about lending you money or equipment, or who is signing any kind of financial contract with you. And, of course, you’re welcome to check your own credit report too.

How Do I Check My Credit Report?

Many websites, and sometimes even the agencies themselves, will try to charge you plenty of money to access your credit reports. However, under the Consumer Credit Act 1974 you have the right to check your report for a maximum fee of £2 per agency.

To check your credit report, simply go to the website of one of the agencies and follow directions. As of right now both Experian and Equifax offer free month long trials, which include a free copy of your current credit report. However, if you forget to cancel your trial membership you will be charged a monthly fee, so watch out!

Why Would I Want to Check My Credit Report?

It’s recommended that you check your credit report at least once a year, and before applying for any large amounts of credit (like a mortgage). There are two main reasons why you should check your credit report.

The first of these is so that you know what potential lenders are likely to see. If you check your report and find that your credit isn’t great, then applying for a huge mortgage probably isn’t a great idea, since you’ll likely get denied. Instead you might opt for a smaller mortgage, or decide to wait and improve your credit to improve your chances of getting approved.

Secondly, you need to check your credit report to make sure that there aren’t any mistakes, and that there’s no fraudulent activity on your report. If someone, for example, applied for a credit card in your name, then this will show up on your credit report, and you can fix the problem if you catch it.

What Do I Do If I Find a Problem?

There are several kinds of problem that you might encounter on your credit report, all of which can be fixed:

  1. Fraudulent activity: an application that was not made by you
  2. Mistakes: they do happen, payments listed as missed or late that you know were paid
  3. Exceptions: this covers a wide area, but the most common thing is a payment that was missed or late but for a good reason (perhaps you can prove you were out of the country, or maybe you were bereaved at the time)

In the case of the first two problems, credit agencies are required to wipe the relevant piece of information in your file within 28 days of being notified. In the case of the third, there are no requirements, but it’s worth speaking to the agency in question anyway, since they might wipe it. In order to start the dispute process you’ll have to go through the agency that issued the report:

If the agency does not agree to wipe the item from your report after 28 days, you are then allowed to add a “notice of correction” to your file. This can be up to 200 words and should explain why you think that the item is wrong. Once you have started the dispute resolution process with the agency in question they should lead you through the process of writing this notice. The notice will be an official part of your credit report, so all lenders will see it.

Can My Credit Report Change?

Sure it can. You can lower your credit report in many ways, such as by missing payments or making payments late. Applying for lots of credit all at the same time (maybe multiple credit card applications) may also lower your credit. And being refused for credit (perhaps that mortgage application got denied) will also lower your report.

But you can also raise your credit rating. There are many ways to do that, so check out our guide to improving your credit rating to find out more.

Your credit report is an important part of your life if you plan on signing financial contracts or borrowing money. But don’t let the financial jargon confuse you. Credit reports are relatively simple, and with the information above you should have all you need to know to confidently handle your credit.