Understanding your credit report and improve your credit score

Written by

Tara Covell

Friday 13th August 2021

Since the start of the coronavirus pandemic last year, UK households up and down the country have seen their financial situations change for the better with increased savings, largely unchanged debt levels and a reduction in unessential spending. *

With the economy and daily life returning to normal due to lockdown restrictions being lifted, many of us are going back to our old spending habits. This makes it the perfect time to understand and manage both your credit report and credit score to help keep on top of your finances.

Not only can your credit report influence big life events such as getting a mortgage, but it can also have an impact on smaller things like taking out a phone contact or opening a new bank account.

Our experts at Hitachi Personal Finance have put together a practical, all you need to know guide to help you boost your financial ranking.


What is a credit report?

We all have a credit report - this is what a potential lender will use to decide whether they want to offer you credit such as a personal loan, credit card or mortgage and at what interest rate.

Lenders will also look at your credit history to establish how reliable you will be as a borrower based on factors like your annual income, total amount of current debt, what other finance products you have and whether you make your repayments on time.


Should I check my credit report regularly?

Make it a habit to check your credit report at least once or twice a year, as well as before applying for any type of finance. This makes it easier to correct any errors which could reduce your chance of being offered the most competitive rates or even see your application declined.

This is also a good opportunity to check for any fraudulent loan applications made in your name as they can be extremely damaging to your credit report, especially when the debt is left unpaid.

As there are a few different credit reference agencies (Experian, Equifax, and TransUnion), the information they hold can differ. We recommend checking your report through all three agencies to be on the safe side.

You can check your credit reports as frequently as you’d like with no penalties or fees.


Can payment holidays affect my credit report?

At the start of the pandemic, many lenders (including ourselves) offered payment holidays to customer struggling to make their repayments due to a change in financial circumstances.

The first six months of a payment holiday won’t be marked down as missed payments on your credit file. However, lenders may still be able to find out this information and use this information to influence their decision on your next loan application, e.g., they can see your loan balance hasn’t reduced for a few months and conclude you’ve had a payment holiday.

If you have received additional help after the initial six-month payment holiday period, then these deferred payments will show on your credit report as they are classed 'forbearance' which lenders are required to report on.


What information shows on my credit report?

All lenders use at least one of the three credit agencies we previously mentioned, and this data comes from four main sources: electoral roll information, court records, search, address, & linked data, and account data.

What's included:

  • your name, address, and date of birth
  • if you’re on the electoral roll at your current address
  • how much you currently owe lenders
  • any late payments or missed payments in the last seven years
  • any County Court Judgments (CCJs) made against you
  • whether your home has been repossessed or you have moved away owing money
  • whether you have been declared bankrupt or have an Individual Voluntary Arrangement (IVA).

What's not included:

  • the amount of money in your current account
  • your salary
  • savings accounts
  • student loans
  • criminal record
  • medical history
  • parking or driving fines
  • council tax arrears

Top tips for improving your credit score

Make sure you’re on the electoral roll – If you’re not registered on the electoral roll under your current address, get this updated. If you’re in shared accommodation or living at home with your parents, you can still register.

Build up your credit history - Having a slim credit file can make it difficult for lenders to assess your credit worthiness resulting in a low credit score. This is a common problem for young people and people who are new to the country. Paying for your utilities, insurance or mobile phone monthly is a good way to build up your history as well using a credit builder credit card.

Keep up with your payments - Paying your accounts on time and in full each month is a good way to show lenders you’re a reliable borrower, and capable of handling credit responsibly. Old, well-managed accounts will usually improve your score – although be sure to read about the potential impact of unused credit cards.

Don’t spend to your limit - Your credit utilisation is the percentage you use of your credit limit. For example, if you have a limit of £2,000 and you’ve used £1,000 of that, your credit utilisation is 50%. Usually, a lower percentage will be seen positively by companies, and will increase your score as a result. If possible, try and keep your credit utilisation at 25%.


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