What is a credit report?
A credit report is a personal file that can have a profound impact on the way you live your life. These reports detail any loans or credit that you have applied for, and whether you were refused or accepted. They also log information about your repayment habits on loans and bills, enabling future lenders to ascertain whether you are a good borrower or a high risk. Any late repayments or defaults are logged on your credit report, as well as your credit application history. In fact, credit reports can even details criminal history and job application information.
Credit reports are extremely important, and these reports are used by potential lenders whenever you apply for credit. Whether you are applying for a mortgage or car loan, a store card or credit card, the likelihood is that your credit report will be checked before the lender will offer any sort of finance. If you apply to rent a property, your credit report may be checked. Even some job applications, such as the police, will entail a credit check against your credit report. Any adverse information such as late or missed repayments, court actions, or bankruptcy can leave a huge black mark on your credit report, and this can result in a low credit score, and refusal of credit on many levels.
Who holds these credit reports?
Credit reports are maintained and held by agencies known as credit reference agencies. Two of the main credit reference agencies used are Experian and Equifax. A credit reference agency gathers information about an individual’s credit history, such as loans and credit taken out, repayment habits, bankruptcies and court action, etc. The agencies are then able to provide this information to other companies that are registered with them. The companies that will ask for information from your credit file are those that offer some form of credit, and to whom you have applied. All lenders are required to inform you at the time of application, either verbally or in writing, that they will be conducting a credit check, and you must agree to this before they do so.
Why are credit reports so important?
Your credit file allows other lenders to determine whether they should trust you. If your report indicates that you have taken out credit in the past, and have maintained timely and regular repayments, then getting credit should not prove a problem. If your credit report indicates that you are a bad payer, and that you have missed or made late payments, you will most likely have a bad credit score. Likewise, those with court action or bankruptcy logged against their credit file will have a bad credit score. This means that future creditors are less likely to lend you money. Also, those that have never taken out credit before will have no credit history on their file, and this is also seen as a risk by lenders because they have no way of knowing whether you are a safe bet or not.
How can your credit rating be improved?
If you are one of the millions of people that have a poor credit rating through late or missed repayments being logged on your credit file, the best way to improve your credit rating is to ensure that you make all repayments well in time and for the amounts requested (or more). Many lenders now offer bad credit loans and credit cards, enabling you to prove that you can manage your finances responsibly and giving you the opportunity to improve your credit by making timely and regular repayments.
You must also be careful about making applications for credit when you already have a low rating. Each application that you make is logged on your report, whether or not you are accepted by the lender. Any refusals can harm your credit score, so it is best no to apply haphazardly for credit because you may be harming your credit report each time you are refused.
Does the consumer have access to his or her own credit report?
Everyone has access to their credit reports, but you should note that a small fee is normally charged by the credit reference agency in order to send out the information. It is actually advisable to check your report every now and again, because it is quite common for inaccurate information to be logged on these reports. This means that you could be getting penalized for something that has nothing to do with you. By keeping a regular check on your credit report you can pick up on any discrepancies and have them removed or queried.