Being denied credit can be an extremely frustrating experience – especially if you thought your finances were in pretty good shape and you can’t figure out what went wrong. If this has happened to you, the first thing you should do is check out your credit report and credit score. Read our expert guide to find out more.
Credit report vs. credit score
When you apply to borrow money – whether it’s a loan, overdraft, credit card, store card or a mortgage – your lender will gather information about you and assess your ability to meet your monthly repayments. The important thing to remember here is that each and every lender has a different set of criteria – so what makes a customer attractive to one lender may not necessarily be attractive to another. Strictly speaking then there is no such thing as a universal credit score, as every lender has its own unique criteria & scoring system.
What you do have is a credit report – a document that contains information about yourself and your financial history. This report is one of the main things the lender looks at when considering your suitability to borrow money.
What is a credit report?
A credit report (sometimes referred to as a credit file) is a document containing information about you and your past financial behavior.
In the UK credit reports are held by 3 credit reference agencies – Experian, Equifax and Callcredit. When you apply to borrow money, the lender will contact one of these agencies, view your report, and use the information on the report to compile a credit score.
What is in my credit report?
There are two main types of information in your credit file – information about you that is publicly available, plus information provided by other lenders.
Personal details and general information:
- Your name
- Your date of birth
- Your current and previous addresses
- Any CCJs (County Court Judgements)
- Whether or not you are on the electoral register
- Details about bankruptcies and/or IVAs
- Whether you’ve had a house repossessed
- Whether you’ve tried to move house whilst owing money
Financial information:
- A list of credit accounts (loans, mortgages, overdrafts etc.)
- The dates you opened these accounts, how much you originally borrowed and how much you still owe
- Details of any late or missed repayments
- Any other individuals you are financially linked to e.g. with a joint bank account or a joint mortgage
- In some instances, information provided by your phone or utility company
When assessing your suitability for a loan, the lender will look at your credit report along with the information you provided on the application – things like your monthly salary, the reason for the loan and so on.
How far back does a credit report go?
Your credit report contains information for the past 6 years.
What is not included in your credit report
Your credit report does not contain sensitive or personal information that has no relevance to your financial responsibility (such as your race or religion). There are certain other things that are not included in your report. These include:
- Your race, religion or colour
- Your medical history
- Criminal records
- Information about your family and who you live with (although the lender may ask about this in the application)
- Your salary or wages (again, the lender will almost certainly ask you for this on the application)
- How much money is in your savings (however if you are applying to borrow money from the same bank where you savings are held, they may have access to this information).
- How often you have checked your credit score
- Any financial data that is over 6 years old
How do I view my credit report?
You have the right to access your credit report, just like the lenders can. There are several credit report services that will show you your report and give you a score. Some charge a monthly fee, while others offer their services for free but will try and sell you financial products.
Experian are one of the more popular paid credit reference agencies. Noddle are a popular free service.
Does applying for credit put a ‘mark’ on my report?
A note is placed on your credit report when you apply for credit and a lender performs a credit check. Too many checks in a short space of time could make you look desperate and could potentially put off some lenders.
There is no record made when you check your own credit report.
How can I improve my credit score?
Once you have viewed your credit report & accompanying score, you can start working on improving it. No matter how healthy or dire your financial circumstances, there are things you can do to improve your chances of getting credit. We have listed a few of them below:
- Check that everything is correct – a small mistake could be unfairly preventing you from getting credit. Contact the credit reference agency if you spot anything that is wrong.
- Register on the electoral role – This proves that you live at your current address, and you may find it almost impossible to get credit if you are not registered. Get registered here.
- Show stability – lenders like to see proof that you are stable and dependable. Things like staying at the same address and/or the same job for a long time are good for demonstrating this.
- Keep up-to-date with your repayments – just one missed payment will be noted on your credit report and could cause problems.
- Space out your applications – rejected applications don’t appear on your file, but credit checks by lenders do. Don’t make yourself look too credit-hungry.
- Cancel your unused credit cards – you may not be using them, but having several credit cards lying around means that you have access to a large amount of credit. Think about cancelling most of them if you don’t need them.
- Ask the lender to perform a quotation search – sometimes called a “soft search”, this won’t leave a trace on your credit file. Lenders will rarely do this unless you specifically ask them to.
Your experiences with credit
Have you done anything that has helped or harmed your credit score? We’d like to hear about you experiences and advice – let us know about it in the comments section below.