Why It Pays To Keep Tabs On Your Credit Report

Your credit report is a key factor in whether you get accepted for credit or turned down flat. That's why it's so important to know what information it contains. It's even more important to make sure that information is right.

What's In My Credit Report?

Your credit report is a record of your financial history. Every time you apply for a loan, get a credit card or make a payment, information is sent to a credit reference agency. The two biggest credit reference agencies are Experian, based in Nottingham and Equifax, based in Glasgow. Together they have financial information on more than 44 million UK residents.

The credit report contains information on how long you have had credit and what type of credit you have had. This includes credit cards, store cards, loans and a mortgage. It includes the amount owed on each type of credit and your payment history. Lenders notify Experian and Equifax of payments made on time and the balance remaining at periodic intervals. More importantly, they notify the credit reference agencies of any defaults. This means if a person is a repeated late payer or misses a payment it will be noted on the credit report.

Defaults are particularly bad news. If a bank or lending agency claims you have defaulted, they notify the credit reference agency as well as sending nasty letters. Even if you pay up, the default remains on your credit report for six years and will make it harder to get credit. The credit reference agencies also hold information about bankruptcies and County Court Judgements (CCJs). These can also affect your credit rating, though CCJs will not appear if paid off within a month of being issued.

Finally, the credit reference agencies keep information on enquiries made against your name. Some of these may be for credit purposes while others may not. Too many enquiries in a short space of time could count against you when applying for new credit.

When applying for credit, it's useful to know two main things. The first is which credit reference agency the potential lender is using. The second is what's on your credit report. You can obtain a copy of your credit report by paying a small fee. This will allow you to see what the lenders will see.

Check For Accuracy

Once you've got hold of a copy of your credit report, it's worth checking to make sure it's accurate. There can sometimes be errors which will affect your credit rating. For example, if you are living at an address where someone recently had CCJs, this can be thought to be part of your credit record. Also, family members who live at the same address and have the same surname might be associated with you for credit purposes. To get round this, it can be worth writing a notice of dissociation so that your credit rating can be kept separate.

If there are factual mistakes about your payment record, you need to contact the organisation that made the mistake and ask them to correct it. This may take some time but it is worth doing if it improves your credit rating.