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If you are not familiar with the terminology, a credit report is a file that shows the history of your activity with credit. It will mention all the loans you have had, all the credit cards you have opened over the years, your mortgage and all other debts. Your credit report also tells if you have missed payments, defaulted on a loan, or have had any other trouble repaying your debt. It is used by lenders to consider whether or not they should give you more credit, but can also be used by other people, like your landlord, to decide if they want to have you as a tenant or not. So it is very important that your credit report is the best possible, and also that there is no wrong information on it.
Checking your credit report is something you should do often, at least once a year. To do so, you can simply go online to get your credit report, which is a quick and easy process. First, it will help you check that all the information there is on your credit report is accurate. From your address and previous addresses to the names associated to you, for example if you have a joint bank account or credit card with your spouse. If something is incorrect, you can contact the agency to amend the data.
Your credit report will also tell you how you can improve your credit score. For example, if you are not on the electoral roll, an easy way to earn a few additional points is to get registered with your local council.
On your credit report, you will see your payment history, and check that your lending company has been transmitting the right information to the agency. You will also see the amount of credit you have available, and what you have used. For example, if you have a credit card with a £500 balance and a £5,000 credit limit on the card, you only have used 10% of your available credit. This is a good data for lenders if you apply for another card or loan, as they can make sure that your cards are not maxed out.
While you should check your credit report regularly, one thing you should keep in mind is that too many checks can go against you. Lending companies can refuse to give you credit if too many people checked your credit score recently, as they may think you applied for many loans at the same time. Every time someone accesses your credit report, there is a note so you can know who checked it. If you were unaware of certain submissions, you can request to have them removed.
This is also the place where you will notice if someone has been using your name to get credit fraudulently. Identity theft happens, and the best way to avoid it taking bigger proportions is keeping a vigilant eye over your credit report.
Checking your credit report is very valuable before you apply for a loan, a mortgage or a credit card. As we discussed previously, having too many inquiries can be a red flag, so you should check your report before soliciting extra money, to make sure the lender will not find anything wrong with your credit report. Then, as you apply, you can know your chances of being approved are optimal.