What your credit report means to you and how to improve it - Credit Report, Unsecured
With the economy on go-slow and lenders in a cautious mood, this is the perfect moment to get to know your credit report. It lists your credit accounts, your repayment record and much more – and it can make all the difference between getting the credit card, loan or mortgage you want and a string of puzzling rejections.
Click through to CreditExpert to find out what it contains, how it’s used and what you can do to improve it – and your chances of getting the credit you need.
If you’re over 18 and have ever taken out a credit
card or loan, apart from a student loan, then you have a credit report, which is
held securely by a credit reference agency – Experian is the UK’s largest.
Lenders usually check your report when they decide
whether to make you an offer and what terms, such as interest rates, to set. It
helps them to make informed and responsible decisions.
As well as listing your credit accounts and showing
whether you make repayments on time and in full, your credit report contains a range
of information that helps lenders to assess whether you are a reliable borrower
and can afford to take out more credit. This data includes details of any court
judgments against you for non-payment of debts, plus bankruptcies or individual
voluntary arrangements you’ve taken out.
The electoral roll shows if you have registered
as a voter at your current address. Lenders check the roll as a precaution against
fraud, to make sure that you live where you say you do.
Another section lists the people with whom you
share a joint account, such as a credit card or mortgage. These people are known
as your financial associates. Their credit report details don’t appear in your report
but lenders may look them up separately because their circumstances could affect
your ability to repay what you owe.
All this information comes from two major sources.
Some is from public records, such as court records and the electoral roll. The rest
is contributed by lenders. Some lenders only share negative information, such as
missed repayments. Others also share positive information, such as regular repayments.
Only you can view your credit report. Lenders
are allowed access to check your credit history but only when you’ve given them
consent. You have a statutory right to see your credit report – see your Experian
credit report for free with a 30-day trial of CreditExpert, the UK’s leading online
credit monitoring and identity fraud protection service.
Lenders use credit reports to assess whether
potential borrowers are reliable, stable and do not already owe more than they can
comfortably repay. To calculate the chances that you’ll make your repayments, they
take the information in your application form and credit report and allocate each
item a value. They then use a unique formula to calculate a credit score. Generally,
the higher your score, the easier you’ll find it to borrow.
You don’t have a single credit score because
every lender uses a slightly different formula in their calculations. Some even
use different formulae for different products, so you could get different decisions
if you applied to the same lender for a car loan and a store card.
Your credit score also changes over time, as
your circumstances change. For example, paying off a loan could improve your score,
while missing a couple of repayments could cause it to fall.
Regular checks on your credit report help you
to take greater control of your finances. It gives you a snapshot of what you owe
and how well you are coping. It could also help you to see where your money is going
and identify areas where you could cut back.
It makes sense to check your credit report before
you apply for a new credit account. Remember, these aren’t limited to obvious cards,
loans and mortgages – they include anything where you get access to products or
services and pay for them later, from utility bills to catalogue accounts.
Monitoring your credit report also provides valuable
protection against identity fraud – one of the fastest-growing crimes of the 21st
century. Because your credit report contains a record of your credit accounts and
tracks the applications you make, you can easily spot unfamiliar entries or credit
account searches that could indicate an attempt to borrow money in your name. That
allows you to stop problems before they have a chance to develop.
Don’t take a scatter-gun approach to getting
credit. Each time a lender searches your report in response to a credit application,
it leaves a record, known as a footprint. Other lenders who see a lot of these may
think you’re desperate for money or even suspect a fraud. Either way, lots of footprints
could count against you.
If you fear that your credit history isn’t good
enough, don’t make any new applications. Instead, work on improving your credit
report. In the short term, you could close down redundant accounts and register
to vote. Longer term, you should work to pay off some of your debts. You could also
roll up several more expensive debts into a single, cheaper loan.
If you uncover any errors, contact the lender
who supplied the information and ask them to amend it. Be prepared to provide proof
– for example, that you closed an account after repaying it in full.
If there are special circumstances surrounding
an entry, you can contact the credit reference agency and explain what happened.
For example, you might have missed a few repayments because you had an accident
but have never had problems before or since. They can add a note about this to your
credit report, which will be seen by future lenders. Again, be prepared to provide
proof.
Checking your credit report shouldn’t be a one-off,
emergency measure. To keep on top of your finances, you should monitor it regularly
and ensure it remains up-to-date and accurate. See your free Experian credit report
now.
You can track your progress by ordering your
Experian Credit Score, which is available to CreditExpert members – you can order
it during your free trial. It won’t be the same as a score calculated by a lender,
because it uses only the information in your Experian credit report, but it will
show you the likely impact your credit history will have when lenders score you.
Written and provided by Credit Expert