An in-depth look at credit reports - UK
Taken from here
Whether you are an excited first-time buyer or a seasoned property purchaser looking to move home or add a property to your buy-to-let portfolio, maintaining a good credit history is vital if you want to secure mortgage finance for your purchase. Even if you are not in the market for a new home, and you simply want a personal loan or a new credit card, a strong credit record will be essential. All lenders will check yours, regardless as to the financial product you are interested in or the amount of finance you are looking for. To do this, lenders run a credit check on you, and your address, looking for information on whether you are a sensible and responsible candidate for lending, or whether you have perhaps run into financial difficulties in the past, or been refused credit by other lenders.
Forewarned is forearmed, as they say, so it’s sensible to find out exactly what information the credit reference companies have on you, so that you can decide what your next steps are, and determine if you need to take any action to fix or improve your credit score. After all, there isn’t much point in starting to research house prices in the UK and getting a house valuation on your own property in anticipation of a house move, if your chances of getting the mortgage you need are slim because your credit score is low.
The main credit checking agencies
There are three main providers of credit checks in the UK - Equifax, Experian and Call Credit. The various different lenders all use one or other of these three providers, but it is not possible to predict which credit check provider your lender will use to check your credit history. For that reason, it is often wise to obtain a copy of your credit file from each of the three providers, to be sure that you are aware of the full picture. Also, there may be differences in the information held on you by each provider, and any one provider could even hold incorrect or out-of-date information which might need to be corrected.
Credit reference companies are legally obliged to provide you with a copy of your credit report on payment of a £2 fee, although all three companies provide additional services or enhanced reports that may cost significantly more. Remember that the £2 fee for a basic report is a legal obligation, so if you don’t see this offered clearly on the credit checking company’s website, just ask them to provide this service.
What a credit report will tell you
A UK credit check report will contain some basic information about you, along with a numerical score, which can range from 0, indicating very poor, to 999, which is the best rating achievable.
The information about you will include your name, date of birth and any electoral roll information, which will prove your current and previous addresses. It will also list all loans, credit card debts, mortgages and other borrowings, including the amounts outstanding. Past loans within the last 6 years will also be listed.
Negative actions and activity will also be flagged, including missed or late payments, overdrafts (both authorised and unauthorised), CCJs and bankruptcy proceedings. Even seemingly minor issues such as previous applications for credit are detailed, including details of whether such applications were successful or not.
The final point to bear in mind is that if you have a joint account with another person, this will be included on your personal credit history.
Acting on the results
It should be fairly self-evident that you will either be pleasantly surprised by your credit report, or you will have some cause for concern, having read the contents. Of course, you may be absolutely on top of your finances and perform regular credit checks for your own peace of mind. In that case, you will find yourself in the middle ground, with no surprise at all.
If you find that your credit history is actually better than you had imagined, that doesn't mean you can take your eye off the ball, or go on a shopping spree. A good credit history can be spoiled by something as simple as missing a payment here or there, or overstretching yourself with a loan application, which is turned down on affordability grounds. Keep up the good work, maintaining your finances in a responsible way, and your credit references will remain in top shape.
If things don’t look so rosy, and your credit score is less than healthy, take a deep breath and go through the report in detail. Are there any items that are factually incorrect, or things that could be explained to the credit reference company, in order to shed light on the reasons for the negative action. For example, if you had an unauthorised overdraft for a month because your new employer messed up your first payroll entry, the credit reference company may be willing to make a note on your file to explain the blip.
If your credit rating is poor because your financial management is poor, then it’s time to put a longer term plan of action into place. There is plenty of advice available online or from debt advice charities, to help you start to tackle your debt problems and to rebuild your credit file. Sometimes, talking to someone impartial can be the trigger that is needed to help get you back on track. It may take time to repair a poor credit record, but the sooner you acknowledge that there is a problem, the sooner you can start to turn a corner.
Prudence is the watchword
Managing your credit score should be seen as a lifelong activity rather than something that only needs to be thought about when you’re planning a loan or mortgage. At nethouseprices, we suggest that you check your credit history regularly and that you consider your options carefully before applying for any financial product. With house prices in the UK tempting many of us to move or improve, it is only a matter of time before most of us will need to borrow funds to realise our plans. A sound approach to financial management will mean that those plans have the best chance possible of coming to fruition.
At nethouseprices, we cover the entire property market in detail - from mortgage products to changes in legislation affecting both property sales and rentals. Check our site regularly to keep up to date.
Whether you are an excited first-time buyer or a seasoned property purchaser looking to move home or add a property to your buy-to-let portfolio, maintaining a good credit history is vital if you want to secure mortgage finance for your purchase. Even if you are not in the market for a new home, and you simply want a personal loan or a new credit card, a strong credit record will be essential. All lenders will check yours, regardless as to the financial product you are interested in or the amount of finance you are looking for. To do this, lenders run a credit check on you, and your address, looking for information on whether you are a sensible and responsible candidate for lending, or whether you have perhaps run into financial difficulties in the past, or been refused credit by other lenders.
Forewarned is forearmed, as they say, so it’s sensible to find out exactly what information the credit reference companies have on you, so that you can decide what your next steps are, and determine if you need to take any action to fix or improve your credit score. After all, there isn’t much point in starting to research house prices in the UK and getting a house valuation on your own property in anticipation of a house move, if your chances of getting the mortgage you need are slim because your credit score is low.
The main credit checking agencies
There are three main providers of credit checks in the UK - Equifax, Experian and Call Credit. The various different lenders all use one or other of these three providers, but it is not possible to predict which credit check provider your lender will use to check your credit history. For that reason, it is often wise to obtain a copy of your credit file from each of the three providers, to be sure that you are aware of the full picture. Also, there may be differences in the information held on you by each provider, and any one provider could even hold incorrect or out-of-date information which might need to be corrected.
Credit reference companies are legally obliged to provide you with a copy of your credit report on payment of a £2 fee, although all three companies provide additional services or enhanced reports that may cost significantly more. Remember that the £2 fee for a basic report is a legal obligation, so if you don’t see this offered clearly on the credit checking company’s website, just ask them to provide this service.
What a credit report will tell you
A UK credit check report will contain some basic information about you, along with a numerical score, which can range from 0, indicating very poor, to 999, which is the best rating achievable.
The information about you will include your name, date of birth and any electoral roll information, which will prove your current and previous addresses. It will also list all loans, credit card debts, mortgages and other borrowings, including the amounts outstanding. Past loans within the last 6 years will also be listed.
Negative actions and activity will also be flagged, including missed or late payments, overdrafts (both authorised and unauthorised), CCJs and bankruptcy proceedings. Even seemingly minor issues such as previous applications for credit are detailed, including details of whether such applications were successful or not.
The final point to bear in mind is that if you have a joint account with another person, this will be included on your personal credit history.
Acting on the results
It should be fairly self-evident that you will either be pleasantly surprised by your credit report, or you will have some cause for concern, having read the contents. Of course, you may be absolutely on top of your finances and perform regular credit checks for your own peace of mind. In that case, you will find yourself in the middle ground, with no surprise at all.
If you find that your credit history is actually better than you had imagined, that doesn't mean you can take your eye off the ball, or go on a shopping spree. A good credit history can be spoiled by something as simple as missing a payment here or there, or overstretching yourself with a loan application, which is turned down on affordability grounds. Keep up the good work, maintaining your finances in a responsible way, and your credit references will remain in top shape.
If things don’t look so rosy, and your credit score is less than healthy, take a deep breath and go through the report in detail. Are there any items that are factually incorrect, or things that could be explained to the credit reference company, in order to shed light on the reasons for the negative action. For example, if you had an unauthorised overdraft for a month because your new employer messed up your first payroll entry, the credit reference company may be willing to make a note on your file to explain the blip.
If your credit rating is poor because your financial management is poor, then it’s time to put a longer term plan of action into place. There is plenty of advice available online or from debt advice charities, to help you start to tackle your debt problems and to rebuild your credit file. Sometimes, talking to someone impartial can be the trigger that is needed to help get you back on track. It may take time to repair a poor credit record, but the sooner you acknowledge that there is a problem, the sooner you can start to turn a corner.
Prudence is the watchword
Managing your credit score should be seen as a lifelong activity rather than something that only needs to be thought about when you’re planning a loan or mortgage. At nethouseprices, we suggest that you check your credit history regularly and that you consider your options carefully before applying for any financial product. With house prices in the UK tempting many of us to move or improve, it is only a matter of time before most of us will need to borrow funds to realise our plans. A sound approach to financial management will mean that those plans have the best chance possible of coming to fruition.
At nethouseprices, we cover the entire property market in detail - from mortgage products to changes in legislation affecting both property sales and rentals. Check our site regularly to keep up to date.
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