Being able to borrow means showing lenders that you’ve demonstrated good financial behaviour in the past. Lenders will take a look at your credit report to decide whether or not to lend you money.
Understanding your credit report will go a long way towards helping you find out if you need to dispute your credit report or change your financial habits.
What is a credit report?
A credit report is a financial record which holds personal information about your finances, as well as listing any existing financial accounts that are linked to your name. It’s updated every 30 days to include any updates to your financial records, and to include any new borrowing.
Lenders use your credit report to determine if there’s any risk associated with lending you money. This will help them decide the terms of a loan, including the length of time and interest rates set. The better your credit history, the more favourably the lender will feel about the loan – which will be reflected in the terms they offer.
So, it’s important to remove incorrect information on your credit report and ensure it contains up-to-date personal information. For example, evidence of missed payments on your current credit report could have a negative impact on your score, even if they're for previously closed accounts.
Whenever you apply for credit, a lender could check your credit report. This can include:
- Before you apply for a credit card.
- When purchasing an item on credit (for example, a car).
- When looking to buy a house as part of the mortgage process.
Lenders may use different information before they make a decision on your application, depending on their specific lending criteria. This is why you can sometimes get different offers from different providers.
What is a statutory credit report?
A statutory credit report is the version of a credit report provided to you by any of the three credit reporting agencies (CRAs). You’re allowed to request one at any time, for a small fee.
More about credit rating agencies
The three main credit rating agencies are Equifax, Experian and TransUnion (formerly Callcredit). It’s important to make sure each agency holds the most current information on you.
What do lenders see on your credit report?
Your credit report takes various pieces of information to help form the overall score given to you by each credit reporting agency. This is based on a number of things but is mainly shaped around the accounts you have open and what you’ve recently borrowed, or tried to borrow.
Lenders will look at your credit rating to determine whether they are going to lend to you, so it’s important to ensure your credit report is up to date and know how to dispute your credit report if there are inaccuracies.
There are two types of credit checks that a company can conduct when looking into your financial records. These are called ‘hard’ and ‘soft’ searches:
- A hard search will stay visible on your credit report for a year and is an in-depth look into your finances. It can impact your overall credit score.
- A soft search is usually more of an overview into your accounts and doesn’t impact your score like a hard search does.
It’s important to ensure that incorrect information on your credit report is removed as soon as possible. To do this, you can contact the credit reporting agency to make the necessary changes.
What information is included in the credit report?
The credit report will usually include information such as:
- Your name, address and date of birth.
- Any other names you might be known by (for example your maiden name).
- Previous addresses you have lived at over the past six years.
- Any person you have made a joint application with (for example a spouse).
- Any court judgements, bankruptcies, and voluntary arrangements.
- Any bank or credit accounts that you have open, and overdrafts associated with the account.
- Any hard or soft searches made on your account.
Improving your credit score
There are many ways to positively contribute to your overall credit rating. As your report is updated frequently, it’s important to be aware of these things to help improve your score in the future.
To ensure that your credit rating remains at a good level, make sure that you keep the following tips in mind:
- Check that you are on the electoral roll at your current address. To do this, contact your local authority and complete a registration form.
- If a court judgement appears as unpaid and you have already paid it, you should contact the court concerned if you live in England or Wales. Once they know the judgment has been settled, they will inform the credit reporting agencies. If you live in Scotland, you will need to contact Registry Trust Ltd with a receipt or letter from the person you paid, along with a cheque for £4 to cover their search fee.
Credit account information
All the UK’s major lenders share the details of their customers’ credit agreements through one or more of the three credit reporting agencies. This information belongs to the lenders who provided it and is updated every month.
If you dispute your credit report, credit reporting agencies can’t change any of the details supplied without the lenders’ permission.
Every credit account includes a list of status codes for the last six years, which show whether your accounts are settled, up to date, overdrawn, late, or in default (meaning you broke the credit agreement, and it has been cancelled).
The credit account will also show whether the lender:
- Has sold the debt to a third party.
- Has agreed to vary payments or a debt management programme.
- Believes you have moved without providing a new address or thinks you have died.
Closing old accounts
If an account is not being used and nothing is owed, you can improve your credit rating by closing it. This is because lenders look at the amount of credit you have available, as well as the amount you’re currently using. Measuring how much of your available credit you’re using is an important part of your overall financial health.
If you don’t recognise an account, you should contact the lender directly. It may be that you have a store card or credit agreement with a store that’s managed by a separate company.
Some credit store cards also provide extra information about how you manage your account. This can include your monthly balance, the amount repaid each month as well as the number and value of any cash advances.
What builds up your report?
Checking on the following things can help you improve your credit report.
Hard and soft credit searches show that a lender has looked at your report to check your identity or credit history. These can show unusual credit activity, such as a number of applications in a short time, which can help identify attempted fraud.
Records of previous searches can only be removed with the permission of the company that made it.
Having too many previous searches on your file could deter lenders from approving your application, so check to make sure you recognise all of them. If you think there is incorrect information on your credit report such as a search record, you should contact the lender in question to dispute it.
Sometimes a company will do a search that isn’t for lending purposes. This is called an ‘unrecorded enquiry’ and won’t affect your credit rating as it can only be seen by the company that made the search. It is only recorded for your reference.
Shopping around for the best deal shouldn’t leave lots of searches on your file. If you only ask for a quote, then the lender should simply carry out a ‘quotation search’. These won’t affect your credit rating because lenders know they aren’t full applications for credit.
A financial associate search happens when someone you have a joint account with applies for other credit. The report will show that your information was only used in relation to an associate and won’t affect your credit report. However, if you’re no longer connected to that person, you should contact the credit reporting agency to let them know. Remember that their credit record could impact on your future applications.
The Gone Away Information Network (GAIN) shares information about debtors who have moved without giving a new address. This includes the address the customer was last known at and any other address the customer has been recorded at since.
If you think any GAIN information on your report is wrong, contact the lender to dispute your credit report and ask them to update their credit reporting agencies. Alternatively, get in touch with the credit reporting agency and they can contact the lender for you.
CIFAS is the UK’s fraud prevention service. It was developed to detect and prevent fraud and to help stop people’s names, addresses or other details being fraudulently used to get goods and services such as credit.
A CIFAS warning on your file doesn’t mean you have been accused of fraud. It could mean that others have tried to use your personal information, however, so lenders will take extra precautions such as contacting you to ensure your application is genuine.
Notices of correction
These are short explanatory notes of up to 200 words that you can attach to any entry on your file to explain the circumstances surrounding the status. They are visible to any lender searching your file.
You can add these to your credit report by visiting the credit reporting agency’s website or writing to them, quoting the entry reference number and the text you want to attach. You can’t add a statement that is unjustified, defamatory or libellous.
It’s important that you keep a regular check on your financial records to ensure that your credit rating remains as high as possible. This may help increase the number of companies that are willing to lend to you in the future.
Frequently asked questions
How do I dispute my credit report?
It’s important to raise any inaccurate information with the credit reporting agency who issued the original credit report. To do this, you will need evidence to support your dispute. If the dispute is accepted by the credit reporting agency, your credit score will usually update within 30 days. If there are inaccuracies left by a lender, you’ll have to contact them directly.
Does divorce show up on credit report?
Whether you’re filing for divorce, or the proceedings have already been carried out, your credit report won’t be directly affected.
However, if you’re linked to a joint account with a former partner, your credit score could be negatively affected. Therefore, it’s important to check your credit report thoroughly and remove your name from any open accounts if you no longer use them.
Does an overdraft show on credit report?
The answer depends on how or if you use an overdraft. If you’re overdrawn, then this will show up as debt on your credit report if the debt isn’t cleared in a timely manner.
If you are overdrawn within your limit but bring your balance back to zero before the referencing agency compiles your report, this won’t negatively impact your credit score. But, missed payments or unauthorised overdrafts will negatively impact your score.
Read more on how to improve your credit score.