How to access and understand your credit file?

Millions of people ignore their credit report (and its importance) or worry when applying for a credit card or personal loan because they sneakily suspect that their credit score will lead to a rejection.

It’s essential to upload your credit report, know what it all means, and take action if necessary – to rectify errors, rebuild a positive score, or pay off debts that are hurting your access to future finance.

Today we’re going to go over everything you need to know about getting your credit report and interpreting what it says about the health of your credit score.

What is a credit report?

There are three credit bureaus in the UK (Experian, Equifax and TransUnion), each holding a file on every adult in the UK – provided you have ever used a credit facility or held a credit account such as:

  • Mobile phone contracts
  • Credit card
  • Loans
  • Mortgages
  • Utility Accounts
  • Monthly payment insurance

When a potential lender reviews your credit report, they see a range of information about your past activities, including a list of your credit accounts.

The report shows whether you made your repayments on time, or whether you had missed payments, defaults, CCJs, and other more serious debt issues such as repossessions or bankruptcies.

Credit issues usually stay on your file for six years.

Your record will also show your financial ties to other people (such as a joint loan with a partner), your name and date of birth, your address history, and whether you have registered to vote.

How do lenders use credit reports?

Any company that offers you financing will normally ask for permission to access your credit file. Your landlord or employer can also check your credit report, although they will only see limited information such as details about your voter registration, insolvencies and CCJs.

A low credit score may cause lenders to deny your application, or if they approve a credit application, they may charge you higher interest rates or fees. Lenders will also perceive the information in your credit file differently.

For example, if you took payment holidays and were on leave during the pandemic lockdown, this will not directly impact your credit report, but could influence your future access to borrowing. Wonga recently published this guide to explain how fast loan websites use your credit report and the impact this may have on your score/eligibility.

Understanding Your Credit Score

Your credit report score differs from one credit bureau to another. That’s why it’s often a good idea to download a report from each of the major credit reference agencies, as a lender can use one or the other, or potentially all three!

Credit scores are calculated automatically and do not provide context about the factors in your report that resulted in that score. You can therefore mitigate potential impacts by including additional information in a credit application.

However, some lenders rely on credit scores as an objective marker of creditworthiness. Therefore, if there are opportunities to improve your credit score, it can significantly affect your credit applications or the interest rates you are offered.

The idea of ​​a credit score is that it demonstrates the level of risk associated with you as an applicant.

For example, you will have a slightly lower score if you have missed payments. If you have multiple credit cards and multiple loans, this will further lower your score.

It’s also possible to have a low score (or even no credit score at all) through no fault of your own.

Applicants looking to take out a mortgage who have never had a credit card or other loans may find it difficult to qualify. Not because they’ve ever been late with a payment, but because they’ve never used credit financing and haven’t built up a track record of good money management.

In these situations, it may be advantageous to take out a builder’s credit card or similar account, using the account (with regular payments in full to settle the balance) to establish a positive credit rating. We also recommend that you consult Experian’s guide to build your credit score.

When to review your credit report

Most people only recognize a problem with their credit report or credit score when they apply for a financial product such as a personal loan and are rejected due to issues that may have occurred years ago. .

If you are considering taking out a loan, applying for a mortgage, or renting a new property, it may be helpful to download your credit report beforehand to assess the information available.

You can also check your credit report regularly and use it to track your score and make incremental improvements.

You can make contributions to pay off credit card debt or close credit accounts as they’ve been paid off to track the impact of this on your score.

There’s no right or wrong time to improve your credit rating.

Still, it certainly pays to leave as much time as possible between a big financial investment and a credit reference check.

The more time you have to check for errors on your report, delete old accounts, or wait for historical credit issues to clear up, the more likely you are to be approved and get the best interest rates available.

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