The Importance of your Credit Report


What is a credit report?

Your credit report is a record of information about your credit history and it shows mortgage lenders how you have handled credit in the past. It also allows lenders to assess the risk involved when you apply for credit.

Different lenders will use different reports to assess your risk, the main ones being; Experian, Equifax and TransUnion.

What does your credit report look like?

The report contains information around how much money you have borrowed in the past or if you have previously paid your bills on time. They also contain public record information such as whether you’re on the electoral roll or if you have a bankruptcy in your name.

Your report will also contain information surrounding any other financial associations you have with another person. For example, if you’ve got a joint mortgage with another party.

All your debt is refreshed once a month and credit reports hold data for around six years – after that, the data is removed from the record.

Grades and credit scores

There are different grades that will appear on your credit report. These grades go from excellent, good, fair, poor and very poor.

It’s important to note that different credit reference agencies use different scores, so your score on Equifax may be different to the one that’s showing on Experian and vice versa. As a general rule of thumb, a credit score above 750 is seen as an excellent score.

Your credit score is based on your lending history and whether you have paid in full and on time. Although your score is important and is assessed by lenders, it isn’t the most determining factor in you securing a mortgage and if you have a lower score, there is still a chance you can secure a mortgage by approaching the right lender.

Viewing your credit report

It’s a good idea to obtain a copy of your credit report now and again to ensure you are keeping on top of your finances, so when it comes to the likes of a mortgage application, you know exactly where you will stand.

If your score is lower, you can then look at ways of improving it – but without looking at your report initially, you wouldn’t be able to identify this kind of information.

Credit Searches

During the mortgage process, it’s important to not do any credit searches as this will flag to a lender that you are in desperation for credit. To them, they want to keep their risk to a minimum and if you are flagged as someone applying for credit when you are trying to obtain a mortgage, it may hinder your success.

What if something on your credit report is incorrect?

If you see something wrong on your report, you can go to a credit reference agency or you can go directly to the lender who the incorrect data is associated with. A dispute flag will then be put on your credit report, which will show for 28 days.

If there’s incorrect data showing on your credit report that isn’t resolved after the dispute flag has been raised, you can appeal against it – this is known as a notice of correction. A notice of correction is an explanation that you can put onto your credit report showing why something has gone wrong (such as, you were made redundant and were therefore unable to keep up with your repayments).

Maximise your success

Although your credit report is not a determining factor of mortgage acceptance, it is extremely important and it will always be viewed by a lender. Therefore, ensuring you keep up with your repayments and keeping any adverse credit issues away from your record will immediately show you are a lower risk borrower, increasing your chances of getting a mortgage deal.