How car finance agreements appear on your credit file and what to check

A car finance agreement could appear differently on a credit report depending on where you check it. And there’s a good reason why it’s important to make sure that everything that’s being reported is accurate and up to date.

Let’s look at how you can monitor all the data being reported about you, the potential errors to look out for, and what to do if something doesn’t look right.

What counts as a finance agreement?

A finance agreement is a legally binding contract between a borrower and a lender that outlines the terms of a loan or credit arrangement. When you go to collect your car, you will have signed this legally binding contract that ties you into paying monthly for a set number of years until you've paid off the full value of the car.

Some of the common car finance agreements in the UK are:

• Hire purchase: This is one of the most popular car finances in the UK. With a hire purchase agreement, you typically pay a deposit (although sometimes you don't have to if the dealership has zero-deposit deals), followed by fixed monthly instalments. The finance company owns the car during the agreement and ownership usually passes only after all required payments have been made. Sometimes, there's also a final fee requirement at the end of the finance agreement, called an 'option to purchase' fee.

• Personal contract purchase (PCP): PCP follows a similar route. You generally need to make a deposit, which is, again, followed by monthly instalments. The difference is that PCP agreements have a substantial optional final payment, usually called the balloon payment or guaranteed minimum future value. You have to pay that final amount to take ownership of the car (subject to the agreement's conditions). Or, the more common option is to return the car for a new one.

• Conditional sale: This is similar to hire purchase, but ownership passes automatically once the contractual conditions, such as all scheduled payments, have been satisfied. The difference between hire purchase and conditional sale is that you don't need to pay any fee at the end to take ownership of the car.

• Personal loans to buy a car: Some people take the route of taking out an unsecured personal loan, usually from a bank, to receive better interest and repayment rates. This is still a finance agreement and will normally appear on the credit file, but usually as a personal loan or fixed-sum loan.

• Personal contract hire (PCH) and leasing: PCH is a long-term hire arrangement, not a purchase arrangement. You pay to use the car and don't get to own it at the end. Legally, PCH is normally consumer hire rather than a consumer credit agreement. Providers may nevertheless conduct a credit check, and a hire account may be reported where the provider participates in CRA data sharing.

What details do lenders report to credit reference agencies?

Not every lender will report to every credit reference agency. That’s why your credit report can and score can be different depending on where you check it. But with Checkmyfile, you see everything in one place.

We provide the UK’s most detailed credit report. It’s the only service that puts all your data from Experian, Equifax, and TransUnion side by side. Get started with a 7-day free trial, then it’s £14.99 a month. Cancel online anytime.

Information that lenders could report to credit reference agencies about your agreement include:

• The lender or reporting organisation's name and business type.

• The account type and an account number or masked reference.

• The date the account started and, where relevant, ended.

• The original or starting balance.

• The current reported balance.

• The regular instalment amount and payment frequency.

• The repayment term.

• Any deferred or balloon payment.

• Monthly balance and payment-status history.

• Arrears, arrangements to pay and default information.

• Whether the account is active, settled, partially settled, satisfied, closed or otherwise terminated. 

But you won't necessarily see all of this information.

How do finance agreements appear on your credit file?

Car finance agreements can influence two areas of your credit report. The first is a hard search.

Lenders will perform a hard search of your credit report as part of their lending application process. It allows them to check how much you can afford to borrow and how much of a repayment risk you might be.

If your application is approved, an active credit account should subsequently appear in the accounts section of your file. 

How long do finance agreements stay on your credit file?

In the UK, active finance agreements remain on your credit file indefinitely while open. Once closed or settled, they remain on your credit report for 6 years from the date the account is settled or closed.

What to check on your credit file

It’s important to monitor your credit report and make sure the information reported is accurate and up to date. Reporting mistakes can happen – and something like a spelling error in your name or address, or a late payment, could impact future credit applications.

If you spot something that doesn’t look right on your file, our UK-based customer care team can help.

What to do if you find an error

Don't panic if you find an error. The first thing to do is contact the lender directly. It's better to do it in writing with a formal email so you have evidence of communication. 

If that doesn’t work, we can support you with our dispute resolution service at Checkmyfile.

How to find old car finance agreements

If it hasn't been six years since you closed or settled your car finance agreement, you should be able to find old car finance agreements and the details of it on your credit report. But remember, it may not have been reported to every credit reference agency. Get your most detailed credit report today.