Your Credit Report holds a huge amount of information about you and your past relationship with credit. It’s collated from a wide variety of sources, is always changing and plays a major part in any lending decision - but you shouldn’t be afraid of what it shows.
In fact, knowing what information is held about you and what prospective lenders are looking for in an ideal customer could help improve your chances of being accepted next time you apply for any sort of finance or credit agreement.
Checking your own Credit Report will also allow you to verify that everything being reported is correct, as although rare, errors do happen.
Here are the main elements you should check:
A Good Payment History
In an ideal world, your payment history for old and existing credit agreements would show a sea of green ‘OK’ markers. These show that the required payments were made on time that month, and collectively demonstrate that the account has been well-maintained.
It’s not just positive information that is reported though. Late payment markers are a fairly common occurrence on Credit Reports and allow prospective lenders to see if you’ve had any problems meeting repayments in the past. Just how much of an impact this has on your Credit Rating will vary, depending on how late those late payments were.
The odd late payment shouldn’t have too much of an effect, assuming the majority of your accounts are all paid on time, but anything more than 1 month late and you might start to see some lenders get twitchy.
Account information is generally reported for a period of six years, and the recency of any information will also have a bearing on the impact it has.
This article will give you more detail on the types of payment marker that can show on your Credit Report.
That you are ‘credit active’
As well as looking for evidence of how you’ve managed credit agreements in the past, lenders will also check to see whether you are credit active. This is another indicator of your relationship with credit. For example a credit card provider might want to know if you’re likely to use a card if they issue one, rather than simply leaving it in a kitchen drawer for emergencies.
Being credit active (as long as you pay everything on time) will also ensure that you will be able to demonstrate a consistent and recent record of being creditworthy.
We wouldn’t recommend taking out credit for the sake of it, but used in the right way it can help.
If You Own your home
Whether or not you own your home isn’t something that is specifically detailed on your Credit Report, but any mortgage account will be reported (and usually by more than one Credit Reference Agency).
Some lenders may look at a well-maintained mortgage more favourably than other types of account and though owning your own home isn’t something you can change overnight, as a general rule, credit ratings go up as you get older and having a mortgage often forms part of that cycle.
With any mortgage, it’s vitally important that all repayments are made on time. While a prospective lender might be prepared to ignore the odd late payment on a store card, it is unlikely to take the same view if there are late payments recorded against a mortgage.
Correct Public information
In addition to the information that shows how you have repaid existing and previous credit agreements, ‘public’ data is also reported on your Credit Report.
Some smaller lenders, employers and landlords can often only see this level of information, which largely consists of the Electoral Roll, Court Information and Insolvencies.
Don’t underestimate the importance of being registered on the Electoral Roll at your current address: it makes it easier for anyone checking your Credit Report to verify who you are and where you live and demonstrates stability. As such, the longer you’ve been registered at your current address, the better.
Any previous addresses you’re linked with will also appear on your Credit Report, often even if you don’t disclose them. To make it easier for lenders to find the information they need, it’s important that you provide your addresses in the same, consistent format.
Other people
It’s not just your own financial history that can determine the outcome of a new credit application: anyone you are financially linked to on your Credit Report will also be assessed, and can have a positive or negative impact on the outcome depending on their own credit history.
It’s important to check this section carefully, as financial associations don’t end just because a relationship does. If you do find an association that is no longer applicable, you can ask to have it removed by lodging a Notice of Disassociation at the relevant Credit Reference Agency.
See How You Appear to Lenders
Before you apply for credit it’s important to check your Credit Report for yourself to make sure everything is appearing as it should be so that know exactly what a prospective lender will judge you on.
If you haven’t already, you can try checkmyfile free for 30 days. You can cancel anytime online, or via freephone or email. After the free trial, it costs £14.99 a month until cancelled.