What is a credit report?
A good credit score can help you get better deals on loans and mortgages. But what exactly is a credit report? And how does it work?
Key takeaways
Your credit report plays a crucial role in financial decisions, and understanding its components is essential
Your credit report determines lending decisions but be aware that lenders must explain if they decline credit based on the report
It’s essential to address any inaccuracies in your credit report promptly, this can be done by contacting your lender
A credit report, sometimes known as a credit file, is a record of how you've used credit in the past and your financial history.
Your credit report is the key determinant of your credit score. The latter isn’t set in stone, and will typically go or down depending on how you manage your money.
Lenders use your credit score to decide whether to accept your applications for mortgages, loans and credit cards.
Your credit file and credit score will also determine the interest rate that lenders offer you and what sort of credit limit you qualify for.
Why is a credit report important?
Your credit report is important because it determines lenders’ willingness to advance you money for life goals.
That might be to start a business, or buy a house or a car. Your credit report can even affect your chances of securing some jobs.
And day to day, it determines which financial products - such as loans, mortgages, credit cards, and bank accounts - you're eligible for.
What information is in a credit report?
Your credit report will include personal details, such as your name, current address and previous addresses, and whether you’re registered to vote on the electoral roll.
It will also include details of lenders you’ve borrowed from in the last six years, as well as any late or missed payments.
Credit rating agencies (CRAs), such as TransUnion, Equifax and Experian, keep information from the courts too.
This may include any County Court Judgements (CCJ) in your name, Individual Voluntary Arrangements (IVA), or bankruptcy.
It’s worth noting as well, that your credit report will also show details of people with whom you’ve been associated financially in the past. That might be via a joint mortgage or joint bank account.
What factors determine my credit score?
Factors that influence your credit score include:
Repayment record: Repaying your debts and bills on time is critical. If you’ve got a history of missed or late payments, or CCJs against you, it will affect your report negatively
Registering to vote: Being on the electoral roll will help your credit report
Credit history length: In general the longer your credit history, the better
Amount owed: The higher your debt, the lower your credit score is likely to be
Lots of unused credit accounts: Make sure you close credit accounts that you’re not using to help maintain your score
High volume of credit applications. Too many credit applications in a short period can hurt your score. Remember: each time you apply for new credit, you'll trigger a hard credit check that will show on your credit file
How do lenders use the information on my credit report?
Lenders use the information on your credit report to decide whether to lend to you.
In the event that a lender opts not to advance you credit after checking your credit report, they’re obliged to tell you why.
They’re also required to tell you which credit rating agency they used.
How do I access my credit report?
You can see your credit score for free with MoneySuperMarket’s Credit Monitor service.
All you need to do is tell us a few details about yourself and we’ll track down your personal credit score.
Better still, we’ll also provide suggestions to improve your rating. And we can show you credit card and loans offers tailored to your score too.
Alternatively, you can check your score directly with any of household-name credit reference agencies: Equifax, Experian and TransUnion.
How often should I check my credit report?
It’s always a good idea to regularly take stock of your financial situation. With that in mind, we’d recommend that you check your score at least annually.
You’re free to check your score as often as you like, though. And because it only entails a 'soft search' you can rest assured that it won’t affect your rating.
So if you want to check in monthly to ensure you’re aware of any positive or negative changes to your score, you can.
What should I do if I spot errors on my credit report?
If you find a mistake on your file, it’s critical you take steps to correct it. Here are some of the steps you can take to do so…
Inform the lender
Let the lender know as soon as you can, making sure that you have evidence of the error, in the form of receipts or statements.
Some lenders will take immediate action and remove it. Others may require you to raise the matter through their official complaints channels.
The onus is on the lender to inform the credit agencies they employ. So you’ll only have to submit a single request.
Get in touch with the credit agency
If the lender says they don’t have a record of the mistake, take your complaint to the credit reference agency in question.
All three of the major credit rating agencies Experian, Equifax and TransUnion (the agency used by our Credit Monitor service), have online forms that allow you to submit a request to correct a mistake.
Submit a notice of correction
If neither of those avenues allow you amend the mistake, your next port of call is to raise a ‘notice of correction’ on your credit report.
This allows you to write a 200-word statement to explain the mistake (for example, you may have missed a payment due to ill health) and ask lenders to take it into account.
How long does it take to improve my credit score?
It's certainly not something that will happen overnight. But by displaying a consistently responsible attitude to credit and your finances, rest assured that can usually anticipate improvements to your score.
That means meeting your repayments, ensuring you're registered on the electoral roll and being diligent about checking your credit report for mistakes
Other useful guides
Nurture your credit score with Credit Monitor
You can check your score and credit report for free as often as you like with Credit Monitor.
Watch your credit score grow and get alerts if there is any suspicious looking activity on your file – so you can avoid being the victim of fraud.
You’ll also receive regular updates and free tips and advice on how to keep improving your score.
