How to Access and Understand Your Credit Report?

Millions of people are either unaware of their credit report (and how important it is) or worry when applying for a credit card or personal loan because they have a sneaking suspicion that their credit score will result in a rejection.

It is vital to download your credit report, know what it all means, and take action if necessary – to rectify errors, rebuild a positive score, or pay back debts damaging your access to future financing.

Today we’ll run through all you need to know about getting hold of your credit file and interpreting what it says about the health of your credit score.

What Is a Credit Report?

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

  • Mobile phone contracts
  • Credit cards
  • Loans
  • Mortgages
  • Utility accounts
  • Pay-monthly insurance

When a potential lender looks at your credit report, they’ll see a range of information about your previous activities, including a list of your credit accounts.

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

Credit issues typically remain on your file for six years.

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

How Do Lenders Use Credit Reports?

Any company that offers you finance will normally ask permission to access your credit report.  Your landlord or employer might also check your credit file, although they’ll see limited information such as details about your registration on the electoral roll, any insolvencies and CCJs.

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A low credit score may result in lenders refusing 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 report differently.

For example, if you took payment holidays and were on furlough during the pandemic lockdown, this won’t directly impact your credit report but could influence your future borrowing access. Wonga have recently published this guide to explain how quick loan websites use your credit report and the impact this can have on your score / eligibility.

Understanding Your Credit Score

The score on your credit file differs between credit bureaus – this is why it’s often wise to download a report from each of the major credit referencing agencies since a lender may use one or the other, or potentially all three!

Credit scores are automatically calculated and do not provide context about the factors within your report that have resulted in that score, so you can mitigate potential impacts by including supporting information within a credit application.

However, some credit lenders rely on credit scores as an objective marker of creditworthiness. Therefore, if there are opportunities to improve your credit score, it may 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 several loans, this will further reduce your score.

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It is 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 borrowings might find it tricky to qualify. Not because they have ever been late with a payment, but because they have never used any credit financing and haven’t amassed a history of good financial management.

In those situations, taking out a credit builder card or a similar account can be beneficial, using the account (with regular payments in full to clear the balance) to build a positive credit score. We also recommend checking out Experian’s guide to building your credit score.

When to Review Your Credit Report

Most people only recognise an issue within 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 several years ago.

If you have any plans to take out a loan, apply for a mortgage or rent a new property, it may be worthwhile downloading your credit report beforehand to assess the information available.

It is also possible to check your credit report regularly and use this to track your score and make gradual improvements.

You might make contributions to repay credit card debt or close down credit accounts as and when they have been repaid to trace how this impacts your score.

There isn’t any right or wrong time to work on boosting your credit rating.

Still, it is certainly advantageous to leave as much time as possible between a big financial investment and a credit referencing check.

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The more time you have to query errors on your report, remove old accounts, or wait for historical credit issues to disappear, the greater your chances of approval and achieving the best interest rates available.

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