If you want to borrow money from a bank, building society or credit card company, they will invariably check your credit report before agreeing to lend to you.
The same applies if you want to take out any sort of credit agreement, including a pay-monthly mobile phone contract.
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What is a credit report?
In the UK there are three Credit Reference Agencies (also often referred to as CRAs): Experian*, CallCredit and Equifax.
These companies collate information from various sources, including public records such as the electoral roll and credit account information from lenders.
Most people will have a credit report, although the amount of information on it may differ - depending on whether (and how much) credit you have used now and in the past.
The report – also known as a credit record, credit history or credit file – shows what you have borrowed and whether you have made the agreed repayments in full and on time. It will also show applications for credit that you have made, even if you didn’t go ahead with them or you were turned down.
It will show details of any credit you have access to, such as credit cards and overdrafts, including joint credit accounts that you hold with another person.
Your report will also have personal details, such as your current and previous addresses. It will also show details of any County Court Judgements and bankruptcies.
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How are credit reports used?
Financial companies, who are regulated by the FCA, are allowed to look at your credit report (as long as they have your permission) when deciding whether to accept your application for a loan, credit card or mortgage.
They will each have their own criteria for deciding whether to lend to someone and will use your credit report, which they will have obtained from one of the three CRAs.
If you have a history of late or missed repayments, there is a higher chance of being rejected. The same is true if the address you have supplied on your loan application is different from the current address you are registered at on the Electoral Roll.
Find out how to improve your credit report
If you are turned down for credit, the company is not obligated to give you specific reasons.
Banks and building societies aren’t, however, the only organisations that can check your credit report. Potential landlords and employers can also make checks before agreeing to take you on as a tenant or member of staff, for example. This can help them to confirm your identity.
What information can your employer access?
How long does information stay on a credit report?
Details such as missed repayments or credit agreements that have come to an end typically stay on your credit report for at least six years.
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