Understanding your credit report

We explain how credit scores can effect mortgages.

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Viewing and understanding your credit report

When you apply for a mortgage, or attempt to remortgage your existing home, your credit report will be a significant factor in whether your application is accepted or declined. It’s a detailed analysis of your financial history, and you’re able to request a free copy of it at any time. Other lenders will also view these reports to determine your suitability as a prospective borrower or customer.

The UK’s three big credit reference agencies all produce their own credit reports, which vary in presentation. However, they all draw similar conclusions because they’re based on the same information from lenders, Government agencies and financial businesses.

Everyone’s report is different because each person’s financial history is a unique blend of positive and negative events. And because financial matters are often quite complicated, understanding your credit report might not be straightforward…

 

Key steps in understanding your credit report

A credit report contains information about your financial affairs and history, including people you have a financial connection with. You can see an example of this in the picture below.

 

 

Other information that might be contained in your credit report includes:

  • Personal details like your date of birth and current address.
  • Financial data about your income and expenditure history.
  • Details of financial links to other people (e.g. shared bank accounts).
  • Information about long-term financial commitments, such as car loans and mortgages.
  • Records of any financial issues – late loan repayments, CCJs, unauthorised overdrafts, etc.
  • Notes of previous credit searches conducted on you – repeated searches may look suspicious!

 

 

What is my credit score?

The CRAs use all the above information to calculate a score between zero and either 700 (Equifax), 710 (TransUnion, formerly known as Callcredit) or 999 (Experian). As part of understanding your credit report, it’s important to know your credit score will vary according to which CRA compiled it. Each agency weights certain factors differently in the algorithm they use to calculate your score.

Credit scores change all the time as your circumstances evolve, and they’re only a rough guide. Any remortgaging application would be based on your credit report as a whole, rather than simply a headline number. Even so, credit scores provide a snapshot of the last six years of financial activity, evaluating everything from mobile phone contracts to mortgages.

 

What should I look for?

The automated credit profiling contained within credit reports often relies on electoral register information. That means you need to be (a) registered (b) at your current address (c) alongside any other residents. Registering should be a priority whenever you move house, even if you regularly change addresses for professional or personal reasons.

Bear in mind most of the information contained within your credit report is held in strict confidence, and can only be seen by authorised third parties.

 

What if I spot something incorrect?

In terms of understanding your credit report, remember it’s only as accurate as the information the CRA holds about you. Reports can feature mistakes or misinformation, including basic errors like an incomplete address history or your name being spelled wrongly.

If you believe anything in a CRA credit report is wrong, check whether the other two CRAs also have incorrect information about you on file. If they do, send them a letter with copies of documentation which proves any mistakes, and politely ask them to update their records.

Your credit report might indicate you’ve been the victim of fraud at some point, with mysterious credit arrangements appearing in your name. If so, we’d recommend registering with the UK fraud prevention service, CIFAS. You should also contact Action Fraud. You may have to approach individual companies you’ve been wrongly associated with, to demand they update their internal databases.

 

Can I improve my credit score and credit report?

Absolutely! As well as identifying mistakes or possible fraud (as explained in the previous section), it may be possible to improve your credit history with these simple steps:

  • If you’re not already on the electoral register, joining it will improve your credit profiling.
  • Close any dormant store cards or unused credit cards held in your name.
  • Study your credit report closely for mistakes, and report them immediately.
  • Request a notice of disassociation from CRAs if you’re no longer linked to a person you’re associated with in your credit report.
  • Don’t apply for credit too frequently, since multiple credit checks are viewed with suspicion.
  • If possible, pay off small debts, or consolidate larger ones with a remortgage or a second charge mortgage.
  • Organise your finances to ensure any standing orders and direct debits are routinely paid ahead of schedule.
  • Request deletion of any CCJs which were settled within 30 days of the judgement.
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