Article by George Coburn - 12th August 2020

Why Is My Loan Balance Wrong On My Credit Report?

One of the most important parts of your Credit Report is your repayment history. Your reported credit accounts will be detailed here, showing how you’ve managed them, as well as any outstanding balances. This account repayment information typically goes back about six years, and will be assessed by lenders during a credit check – helping them come to an informed and responsible lending decision.

That’s why it’s always important to make sure the information on your Credit Report is recorded correctly, as it plays a crucial role in deciding whether or not you are accepted for finance. That said, discrepancies between your actual outstanding balance and the balance on your Credit Report are fairly common. Before worrying about a balance on your Credit Report, it pays to be aware of the Credit Reporting process. You can then tell whether you’re waiting for the balance to update automatically, or if you need to dispute the balance yourself.

If you haven’t seen your most recently reported balances, you check this for yourself by viewing your Credit Report. You can try checkmyfile free for 30 days, then for £14.99 a month afterwards which you can cancel online at any time.

How are balances reported for personal loans?

There are two main ways that a loan’s balance can be reported on your Credit Report:

Just as an example, imagine that someone takes out a loan for £10,000, at 3.5% APR, spread over 4 years. The total repayable over the term, including interest works out to a few pence short of £10,729.

The first method of reporting this would show the account as a £10,000 balance, which decreases as the loan is paid off in instalments each month. In this example, the monthly repayment would be fixed at around £224, but only a proportion of that amount goes towards clearing the capital, with the rest covering interest charges. As you get closer to the end of the loan, more and more of your payment will clear capital since monthly accrued interest will be reducing.

The alternative way to report this would be to show a balance of £10,729 as this is ultimately what the consumer has agreed to pay back. In this case, since the balance represents everything the customer is going to have to repay, when a payment is made, the same amount is taken from the reported debt in its entirety.

Simply put, one balance shows the loan amount without interest and the other shows the total remaining owed including interest. If your balance appears on your Credit Report as a higher amount than you might be expecting, double check to see if the interest owed is being reported too.

Effects of the two methods on your Credit Score

Some people may be concerned that the balance of a loan will have a detrimental impact on their creditworthiness if seen by lenders, but it is important to remember that a Credit Report is a reflection of how you manage credit rather than how much you owe.

For this reason, as long as someone is able to reliably make payments, the account will benefit their credit history irrespective of the lender’s chosen reporting style.

Why might a loan balance appear to be wrong?

Whenever you check the balances of your credit accounts on your Credit Report, it is worth remembering that the majority of lenders only pass information to the Credit Reference Agencies (CRAs) on a monthly basis, so if you’re expecting to see a balance decrease after making a payment, it might not be reflected until the following month.

As a result of this, credit agreement balances can appear out-of-date by anything between four and six weeks from when you made a payment. In the case of loans, you may see an amount owing that is completely different to what you were expecting as a result of the two different ways that a balance may be reported.

What about calculating affordability?

Lenders are increasingly under pressure to ensure that they don’t extend someone’s borrowing to a point where they are at risk of missing payments, so affordability checks are carried out to make sure a loan is suitable for a customer.

When a lender accesses your Credit Report for this information, they will look at the amount you pay towards your loan on a monthly basis – this allows them to work out your monthly commitments vs your monthly income.

As such, the way the loan amount is reported does not affect the outcome of an affordability check, but the amount you repay on a monthly basis will.

What if the balance is just plain wrong?

If the loan’s balance looks completely incorrect, or you don’t even recognise the alleged debt, your first port of call should be to contact the lender that is reporting the information to dispute the entry on your Credit Report. Going straight to the source is often the most effective way to dispute incorrect information and in this instance it’s no different.

If the lender finds an error, it is their duty to correct the information and re-submit it to any relevant Credit Reference Agency, which in turn will update the way the loan appears on your Credit Report.

What if my balance is not appearing on my Credit Report?

It’s fairly common to find that at least one of your credit accounts doesn’t appear on your Credit Report, which means the balance will also be absent.

Firstly, it’s important to remember that your Credit Report is not a definitive list of all your credit agreements. Instead, it’s a record of your accounts that will be visible to lenders when they perform a credit check on you.

There is no guarantee that every one of your lenders will share information with all Credit Reference Agencies. Lenders will only share your balances with the CRAs with whom they have Reciprocal Data Sharing agreements. This means they might give the balance to three CRAs, just one, or none at all – it all depends on which CRAs your lenders have relationships with.

For this reason, it is best to check your Credit Reports with each Credit Reference Agency to ensure that you are seeing everything. By checking all CRAs, you can ensure that you have seen everything they hold for you.

Your Multi Agency Credit Report collates your complete information from all three Credit Reference Agencies – Equifax, Experian, and TransUnion – so you can see everything you need on the same easy-to-use platform. You can try checkmyfile free for 30 days, then for £14.99 a month afterwards. Cancellation is quick and easy online, anytime.

Updated by Sam Griffin on 12 August 2020

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