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Understanding your credit report

We understand that money can be a difficult topic for some people. If you feel like your finances have gotten a little out of control, or you’re anxious about how to make ends meet, it can be tempting to stick your head in the sand, hide the bills and hope the situation will go away. Unfortunately it won’t.

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The best thing you can do if you are having any kind of difficulty in paying your bills or getting loans or credit cards because of bad credit is to face your fear and take back control. Even if you’re managing well it’s still important to have a regular check-in with your credit report, just to make sure everything looks as it should.

In this article, we’ll empower you to feel more in control of your money by talking through how to check your credit report, why it’s important, and what you can expect to find.

What is a credit report?

Your credit report is a bit like a financial CV - a record of all your loans, credit cards, mortgages and other forms of credit and how you’ve managed them. Your credit report goes back a minimum of six years, so most things that happened before then won’t be seen by lenders. This includes debts that you still haven’t finished paying off.

Many people assume that their credit report is something definitive, held in one central location, but it isn’t like that at all. There are many organisations, known as credit reference agencies (CRAs),who hold credit files on you and each company structures the report slightly differently. All of them use the information in your credit report to give you a score - one number that’s meant to be an indication of your creditworthiness.

Who can see my credit report?

Your credit report can be accessed by anyone that you allow to carry out a credit check on you. This is normally as part of an application for credit, but it could also be for something like a mobile phone contract or property rental. Credit checks are done to assess whether or not you are a reliable borrower. A history of poor credit would be a red flag for lenders as it indicates you’re less likely to repay the money they lend you.

In some instances, like a mobile phone contract, lenders don’t get to see the details of your report, they’ll just be given a yes or a no. In this case, they can’t tell you why credit has been declined, it will have been decided by a predetermined rule, with no discretion on behalf of the lender.

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How do I get a copy of my credit report?

There are over 20 credit reference agencies in the UK that are approved by the Financial Conduct Authority (FCA) but you’ll probably be most familiar with one of the big three players - Equifax, Experian and TransUnion.

There are also companies like checkmyfile, that offer a combined credit report, drawing on information from all three of the main CRAs. Checkmyfile does have a monthly fee attached, but offers a free trial. You can also get a free copy of your credit report from us here at MortgageKey.

Ideally you’ll check your credit report on a regular basis to make sure it’s accurate and that your rating is steady or improving.

You can choose to get your report from any one of them, or all three.

  • Get your Experian credit report as part of a 30-day free trial. At the end of the trial, it will cost you £14.99 per month unless you cancel. You can also get free access to your Experian credit report by signing up to the free Money Saving Expert Credit Club.
  • Get your Equifax credit report either free of charge via Clearscore, or access a more in-depth credit monitoring service by going directly to Equifax. They also offer a free trial and it’s £7.99 a month after that.
  • Get your TransUnion credit report free of charge via Credit Karma. You’ll get weekly updates to your inbox and no ongoing monthly fee.

What should I see on my credit report?

The first thing you’ll notice when you get your credit report is your credit score, sometimes called a credit rating. This is a single-figure score calculated by each agency, designed to give an at-a-glance idea of how ‘good’ your credit is. As a general rule, the higher the score the better, although Experian, Equifax and TransUnion all have different scales, so you can’t compare like with like.

To give you a better idea of what counts as a good credit score, we can compare the rankings of each of the three main CRAs:

Credit score Fair Good Excellent
Experian 721-880 881-960 961-999
Equifax 380-419 420-465 466-700
TransUnion 566-603 604-627 628-710

While these scores can be a useful guide, they don’t give a full picture, so it’s important to dive deeper into the more detailed information to get a better understanding of your credit report.

Next, you’ll see details of all the credit accounts you currently have open. Within each of these you will be able to expand the details to show set-up dates, current balances and a table showing monthly repayments. It’s here that you will see any late or missed payments flagged.

In the TransUnion credit report via Credit Karma for example, you’ll see each month marked either with a tick if the payment was made on time and in full, a cross for a missed payment, a D for a default, an H for a payment holiday or an A if you made an arrangement to pay.

It’s a good idea to check the repayment table for each account to make sure there aren’t any mistakes. If you spot anything that doesn’t look right, contact the CRA or your lender.

For each account you should also find information about how to add a Notice of Correction. A Notice of Correction is a note, written by you, of fewer than 200 words, that can be added to your credit report to explain any isolated incidences of bad credit. This is typically a one-off event, such as a serious illness that meant you were unable to work, which caused you to fall behind on payments. The Notice of Correction gives lenders the chance to understand why the credit issue occurred and to see it in the context of what is hopefully otherwise a reliable credit history.

Further into your credit report, you’ll find sections containing some of your personal details, such as your address history and any credit that is listed under previous names you may have had, such as a maiden name.

You will also find details of any financial links to other people. These are worth checking in detail as linked finances can harm your credit rating if the person you are linked with has a history of bad credit. Linked finances come about through shared products such as joint accounts or joint mortgages.

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What’s the difference between a hard and a soft search?

You should also notice a section on your credit report detailing search history. This shows all of the times in the last couple of years when a third party has run a check on your credit report. These fall into two categories.

Hard searches are made when you’re applying for some form of credit. A single hard search probably won’t impact your credit score, but if you had several in a short space of time it could be a red flag and cause your credit score to drop. Lenders can see each search too, so they might be cautious about lending to someone who appears to be taking out multiple loans or cards in a short space of time.

Soft searches are performed normally just to check your identity or to see if you qualify for a particular offer. They don’t impact your credit score or make it more difficult for you to obtain credit in the future. You may notice insurance companies in your soft searches for example - they will do a soft search when you’re looking for quotes for home and car insurance.

Are County Court Judgements on the public record?

Yes, they are, which is why you’ll see County Court Judgements, (often called CCJS), listed under public information. The same is true of bankruptcies and insolvencies - anyone can access this information about you if they know where to look and pay a small search fee.

This is one of the most important sections for potential lenders as this is where the real red flags reside. If you’ve found yourself with a CCJ then your debt has got to the point where you’ve been taken to court and had an order to pay made against you. This often happens when people feel overwhelmed by debt and unsure of where to turn for help and so try to ignore the problem. A lot of CCJs can be avoided by communicating with your lender about any difficulties you are having. If you do this straightaway you will most likely be able to negotiate a lower repayment and avoid being taken to court.

What information is not included in your credit report?

You may notice when checking your report that your current account has a balance showing zero. This is not a mistake - it’s because your credit report only contains information about any credit facility you have with your current account i.e. your overdraft. Your credit report will never show your current account balance.

It will also not include:

  • Details of your salary or income from self-employment
  • Any money you hold in savings or investments
  • Information about your student loan
  • Council tax arrears
  • Criminal or medical records

Why am I getting recommendations for loans and credit cards as part of my credit report?

You may have spotted when checking your credit report that you have ads included for different financial products. This isn’t a part of your credit report, it’s just a way for the credit reference agency to make money.

When you think about it it makes sense that a company like Credit Karma, which is offering credit reports and other services completely free to users, would need some way to generate an income. They do this in several ways, but the main one is through commission from referrals. Every time you click on one of these ads and take out a credit card or a loan as a result, they will earn some money.

Although this doesn’t impact your experience, it’s worth keeping in mind that these recommendations are ads, they are not an essential part of your report and you certainly shouldn't feel like taking out any of these products is something you have to do to improve your credit score.

Conclusion

We hope that this guide to credit reports has given you a good understanding of how to get your credit reports and what you can expect to find on them. Be sure to check your report carefully for any errors and if you think a mistake has been made then flag it as soon as possible. Don’t forget that we also offer a free credit report service, so get in touch if you’d like to find out more about that.

If you’re keen to create a solid financial base for yourself then understanding your credit report is a great place to start. Face the fear, tackle any issues and hopefully, you’ll soon be feeling much more confident about your finances.

Ready to talk? Speak to an expert today: 0800 077 8980

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