Credit reports explained

Find out how to check your credit file, what to do if your credit report is inaccurate, and how you can improve your credit rating.

Credit reference agencies (CRAs) hold information supplied by creditors about how you manage your debts. The three main credit reference agencies in the UK are Experian, Equifax and Call Credit.

Information stored on your credit file stays there for six years. Details of defaults or court action remain for six years too, even if the debt is paid off.

Whenever you apply for further credit, lenders routinely search CRA records to assess the risk you pose them and to prevent fraud. Lenders base decisions on information such as your recent payment history, defaults, and records of court action or bankruptcy. They will check that application details such as your address and date of birth match your file too.

If you have a poor credit history, you may be charged higher interest rates or be refused credit. Lenders have tightened their criteria in the recession.

Check your credit file

If you have been refused credit, check your statutory credit report. You can access it online with Experian, Equifax and Call Credit for £2. Alternatively, you can sign up for a 30-day free trial with Experian – just remember to cancel after that period, to avoid being charged in the future.

Details held by each agency may differ, as not all creditors share data with all three.

Many creditors share details with fraud-prevention services National Hunter Ltd and CIFAS too. It costs £10 to check the information these hold.

Correcting inaccurate data

If your report contains errors, contact the relevant CRA to get them changed. A 200 word explanation called a ‘notice of correction’ can be added if you feel your credit score has been affected by something unavoidable or an entry is factually incorrect.

This remains on your file until you ask for its removal, and is visible to creditors making checks. It may slow down applications, but it’s your opportunity to offer information about mitigating circumstances.

Will a bad credit history affect others?

Your credit file is only attached to you, and not your property or family. Your poor credit history will not affect others unless you have a joint debt such as a mortgage or current account with someone else, which then creates a link between you.

If you have joint debts and you separate, you should write to the CRAs asking them to add a ‘notice of disassociation’ to your files, stating that you are no longer linked to that person.

Restoring your credit rating

Checking your credit reports regularly will help you make sure everything is correct and in order, as well as highlighting fraudulent activity. Records are removed after six years, but there are a few things you can do to improve both your credit score and lenders' outlook earlier.

If possible, pay off your debts and consider cancelling unused credit sources and accounts. Lenders review the amount of debt you hold and credit you can access when processing applications.

Being on the electoral roll and showing evidence of stability will help too. Make sure the addresses on all active accounts and credit agreements you hold are current.

Importantly, lenders want evidence that you are able to use credit wisely over a period of time, keeping up with your repayments and not exceeding your limit. Building up a good recent history shows you are responsible.

Help with unsustainable debt

If you have been missing repayments or find yourself relying on credit to make ends meet each month, your situation may be becoming unsustainable.

Get advice from a free and impartial organisation such as CCCS as soon as possible. Contact CCCS by freephone (0800 138 1111) or using Debt Remedy, its web-based counselling service.