Your credit report contains information about the credit accounts you have held or currently hold.
This article explains what credit reference agencies in the UK do as well as the types of information they store on your credit report.
I also discuss how the information held within your Credit Report can affect the decisions lenders may make when you apply for credit.
If you are like me and in a lot of debt, the chances are that your credit report contains some adverse data.
Whilst your credit score probably isn’t important to you at the moment, once you are out of debt and the adverse information has expired, you might be interested to find out more.
I hope one day to be able to take out a mortgage and part of the application will involve a credit check. At the moment I would be laughed out the door.
An Overview of your Credit Report
Anyway to get back on track your credit rating is determined by a number of different factors including the following examples: –
- Your previous Credit History.
- If you are on the Electoral Roll.
- Whether you have any adverse credit such as Defaults or County Court Judgments.
What is a Credit Reference Agency?
The three Credit Reference Agencies you may have heard of in the UK are:
- Call Credit
They a provided with information from the companies you hold accounts with. They also pull data from public sources as well. When A credit check is performed, one or even maybe two of the above agencies will be used.
What happens when you open a new account?
When you open an account with a bank for example, it is very likely that the bank will update one or maybe even two of the above credit reference agencies with information about the account. This information can include whether you have been on time or late with payments, the balance owed and the date the account was opened or closed for example.
A credit reference agency simply stores the information provided to them by the companies you hold credit accounts with. This means that the credit reference agencies themselves do not have any bearing on any results of credit searches that may be performed when you apply for credit.
Instead a creditor such as a bank will evaluate the information they get from the credit reference agency and using their own formulas, decide whether they will lend to you or not. Other information you provide on the application form will also be taken into account. It all depends on how the organisation works out potential risk.
What types of Information do Credit Reference Agencies hold?
Credit reference agencies will record information about your repayment history. For example whether your payments have been made on time. If you fail to pay an account for a long period of time, you may well receive a default. This would also be recorded on your credit file.
If you apply for credit, a credit search is normally carried out. This search will also be registered on your credit report. It is important to note that whilst the search is recorded for 12 months, the results of the search are not recorded. This is to say that whether you were approved for the credit account or not, this information is not shown on your credit report.
The information about the balances you owe on accounts, the credit limits available to you and whether you have any financial links with other people such as your partner for example are also examples of the types of recorded information.
What if you have been refused Credit?
There are many reasons why you could have been turned down for credit. The examples provided are intended as a guide only and should not be taken as fact. Each lender will have their own set of criteria. Whilst you may be turned down by one lender, you could be approved by another.
One reason why you might have been turned down for credit is if you have bad debts registered against you. Bad debts would include defaults and County Court Judgments. If you have any of these then it is very likely that you will be turned down for credit.
The reason for this is that you would be considered to be to much of a risk to lend money to. However this would depend entirely on the company you apply with. Whilst it might be difficult to get credit on the high street certain lenders, in particular payday loan lenders may lend to you.
If you have made a large number of credit applications within a short space of time, this could also affect the decision you received. A large number of credit applications within a short amount of time could be the indication of someone who is struggling with repayments or could be an indication of fraud.
Another example could be that you already have too much credit, and the lender feels you would struggle to honour your repayments to them.
Can you see your Credit Report?
Absolutely, you can view your credit report online within minutes. Alternatively you can also write to each credit reference agency to request a copy of your credit report.
Both methods carry a fee. The online method is the easiest and quickest way but is more expensive than if you view your report offline.
There are usually added benefits to viewing your credit report online including dispute resolution and explanations about the data held.
Another method available to you is to request a printed copy of your credit report. What you would do is to write off to each agency enclosing the statutory fee of £2.
Looking at the Information your Credit Report contains
When you receive a copy of your credit report you should check the information held on it is accurate. If anything on your report is incorrect you are able to file a dispute with the company who provided the data.
Looking at your credit report will give you a better understanding as to why you have been refused credit. Perhaps there are some late payment markers or defaulted accounts you were not aware of.
Ultimately if any information is incorrect I would recommend you challenge it.