What is a credit report?

25-Jun-2009

   
You may not be aware of it, but if you have ever borrowed money the chances are that you have a credit report. This is a personal history of your financial transactions, taking into consideration mortgages, credit cards and loans, and even mobile phone contracts. Your credit report provides a snapshot of all your credit accounts, your repayment record and how well you are coping with your current financial situation. Lenders use it when they decide what kind of deal to offer you - or whether to turn you down for a loan or credit card.

The more you know about what your report contains, how it's used and what you can do to improve it, the better your chances of getting the credit you need. This summary will get you started. You can see your credit report for free with CreditExpert, and we would recommend that you take a look at it once you know what to look out for.

1. If you're over 18 and have ever taken out a credit card, loan or some other form of credit, then you are likely to have a credit report held by a credit reference agency - Experian is the UK's largest.

2. As well as listing your credit accounts and showing whether you make repayments on time and in full, your credit report contains a range of information that helps lenders assess whether you are a reliable borrower and can afford to take out more credit. Items such as missed or late payments stay on your report for at least three years, while court judgments for non-payment of debts, bankruptcies and individual voluntary arrangements (IVAs) stick around for at least twice that long.

3. Your report shows all your addresses over the past six years and whether you are registered to vote at your current home. Lenders use this information as a precaution against fraud to make sure that you live where you say you do.

4. Another section of your credit report lists the people with whom you share (or have shared) a joint account, such as a credit card or mortgage. They are known as your financial associates and, although their credit history doesn't appear in your report, lenders are entitled to also look separately at their credit history because their circumstances could affect your ability to repay what you owe.

5. Information in your report comes from two major sources - public records, such as court judgments and the electoral roll, and data supplied by lenders. Some lenders only contribute to accounts with late payments. Others share all accounts including those where regular repayments are made.

6. Lenders are not the only people who can check your credit history - with your permission, prospective landlords and employers can see parts of your credit report.  Therefore as you can see, your credit history report could affect not only your ability to borrow money, but also affect your job prospects and chances of renting a home.
 
7. A credit report is not the same as a credit score. Lenders calculate a credit score by allocating a value to information in your application form and credit report and then applying their own unique formula.  This unique formula depends on the type of lender that they are.  A lender specialising in lending to people with bad credit will have a very different target customer to a mainstream or 'high-street' lender. Your score is likely to change with your circumstances and will be affected by each new credit application you make. Generally, the higher your credit score the easier you'll find it to borrow money.

8. If you are thinking of opening a new credit account, it makes sense to get to know your credit report first and make sure that everything is accurate and up to date. If there are any errors, contact the organisation responsible with proof and arrange to get them put right.
 
9. Monitoring your credit report can offer protection from one of the fastest-growing crimes of the 21st century - identity fraud. This includes criminals stealing your personal information and using it to take over existing accounts or set up new ones in your name. Checking your credit report regularly enables you to spot suspicious entries and deal with problems before they escalate.

10. When you make an application for credit, lenders search your report, leaving a record known as a footprint. If other lenders see a lot of these, they may think you're desperate for money or even suspect a fraud, so you should always make sure you only make loan or credit card application when you are genuinely shopping around for the best deal with a view to taking out a product.  If you are just browsing, stop short of formally applying and consider talking to a qualified advisor about your options first.

Check your Experian credit report online with a free trial of CreditExpert, the UK's leading online credit monitoring and ID fraud protection service.