What is a credit report?
A credit report is information that is collected about you, helping organisations to decide whether to accept any credit application you make to them The information is held by licensed credit reference agencies and is made up of public information and information provided to them by financial organisations.
Why is it important to understand your credit report?
The consequences of not fully understanding your report and how it may be interpreted and the effects or it containing inaccurate or out-of-date information can be significant. For example, you might be refused credit; offered a loan but at a higher interest rate; be unable to apply for something because an organisation cannot verify your identify; or have your identity compromised because someone else is accessing your credit report without you being aware of it.
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Why is this information held?
Credit reports are increasingly being used by, not only by lenders for conventional credit services, but by insurance companies, utility providers and local and central government departments to name just a few examples. Organisations use credit reports for the following reasons:
- They need to ensure that they are lending to people who will pay them back the money they lend. If someone has a history of not paying back debt then they will assess the risk of whether that person will pay them back.
- Lenders have to lend responsibly – they need to establish that the person that is looking to borrow is not over-extending themselves and going to become over-indebted.
- To prevent fraud and money laundering - an increasing problem in the UK. Lenders need to make sure that they only lend to the genuine person at the correct address and using the information held on a credit report can help them do so.
- Increasingly, public sector organisations need to make sure that they are dealing with the genuine person and prevent problems such as benefit fraud. Your credit report can help them establish that they are dealing with the genuine person.
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What information is held on my credit report?
A credit report is built up of the following information:
- The electoral roll
- Public information such as court judgments or bankruptcies
- Credit account information – details of previous credit agreements you have held with organisations and how you have repaid that credit
- Previous applications – which organisations you have applied to for credit in the past
- Links to other addresses – previous and forwarding addresses or addresses you have been associated with financially
- Financial associations – a list of people you have a financial connection with such as a joint account.
- Aliases – other names you have been known by and any information held in these names.
- Information from CIFAS – the UK’s fraud prevention service. This is information that shows if there is a record of you becoming a victim of fraud in the past or when you have approached CIFAS to say that you believe you may be at risk of becoming a victim
To see more detail about the above please check out Understanding credit report information
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Credit report facts and fiction
Anyone can see my credit report
Except in very unusual circumstances, only the people you give consent to can see your credit report information. If you make an application for credit, you will always be asked to agree to your credit file being accessed. If an organisation needs to authenticate you to make sure they are dealing with the genuine person, they will also need to gain your consent.
I won’t allow anyone to hold a credit report about me
Much of the information held on credit reports is obtained further to you consenting to it being held e.g. on a credit report application form. If you don’t provide that consent then the information won’t be held but it’s worth remembering that a good credit report will help you obtain the finance you may need in the future.
If the information is publicly available then the information can be held by a credit reference agency.
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