How to check your credit history before applying for a loan
If a loan is applied for, the lender, as part of its assessment procedure, will undertake a credit
reference search on the customer. This search will be made with one or more of the following
three credit reference agencies – CallCredit, Equifax or Experian.
It is also possible for a business to obtain a credit report on another business.
What is a credit report?
The information that the credit reference agencies hold about a customer relates to their
previous financial behaviour and covers a period of three to six years. It is known as a credit
report or credit file.
The information has come from the likes of credit card companies, banks and mortgage
lenders whom the customer has previously borrowed money from or is still borrowing from.
What information is held in a credit report?
Details such as the customer’s name, address, date of birth, electoral role entry, amounts
outstanding to lenders, type of liabilities, repayment history, County Court Judgements,
bankruptcy, Individual Voluntary Arrangement.
How does the customer access their credit report?
Not all lenders record information about people with the same credit reference agency so all
three credit reference agencies should be contacted.
All three should be asked for a copy of the credit report either by ordering online or by post.
The current charge to each agency is £2.
Having keyed “free online credit reports” into the Google search box the customer will be
provided with a list of organisations offering such reports but to receive them free they would
need to cancel the monthly subscription agreement within 30 days to avoid paying any
monies for the reports that they will have been provided with.
When and why should a credit report be checked?
It should be checked before applying for finance and also annually.
The credit report should be checked to make sure that the information is correct as, if not,
it may affect the customer’s ability to obtain finance i.e. he or she may be declined or may
result in him or her being charged a higher rate of interest because of their credit rating.
Another reason is because someone may have fraudulently used someone else’s personal
details to obtain finance.
What should be checked on a credit report?
For example, the customer will be aware of the details of liabilities they have or had, such
as loans and credit cards. He or she should check that the information about each liability is
accurate i.e. amount outstanding, missed payments, etc.
What should be done if some of the information in the credit report is incorrect?
The customer needs to have it corrected as, if it is not, it may affect his or her ability to obtain
credit for years to come.
The sort of common mistakes are when the lender says there have been missed payments
when there have not. Also an address may be incorrect.
The customer should contact the credit reference agency by writing to them requesting the
mistake be corrected providing evidence to support their request.
They have 28 days to respond and if they do not change the records the customer can send
them a notice of correction that they must place on the report that other potential lenders can
Hopefully the above information will be of benefit when applying for finance.