What Grade Would Your Credit Report Get?
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
22nd February 2021
2 minute read
Yikes – the exam season is just around the corner. Cue mass panic, last-minute revision and the frantic rubbing of rabbits’ feet, but how well would you do if you were quizzed on your credit report?
Worrying research shows over 50 per cent of Brits have never even checked their credit report*. This leaves them unaware of the affect it could be having on their borrowing capabilities. Fear not, my little student of spondoolies – I have wisdom to share on credit reports to ensure you score highly on this particular test.
Before panicking too much, it’s important to know what a credit report is, how to check a credit score and how it affects you. Pull up a cushion, my purple Padawan and I’ll unleash my wisdom.
What’s a credit report?
When you apply for credit of any kind, the lender will use your credit report to decide whether or not your application will be successful. A poor credit report makes it a lot harder to find a deal with good karma. They often reserve the best deals for a certain percentage of customers who fall within a good credit score range.
How do I check it?
There are lots of companies out there that provide credit report checking services to ensure that everything is being reported accurately; many of which offer free credit scores and free credit reports. These services can also help you improve you score, spot mistakes and help you on your way to finding the best deals.
How does it affect me?
Lenders use a variety of different tools to determine your credit score and whether or not they are willing to lend to you. Credit scoring is based on criteria such as: the information you provide on the application form, previous accounts you’ve had with them and your credit report (held by Experian, Equifax or TransUnion).
It’s not quite as straightforward as it seems though, because lenders can be fickle beasts – different lenders use different criteria to determine your score. You could be accepted by one lender, but rejected by another.
How does it affect my borrowing?
A bad credit report can mean you’re given poorer rates by lenders, given a smaller credit limit or just rejected altogether. Lenders are also not obliged to give you the best rates that you see advertised or on comparison sites – they only need to offer these to over half (51 per cent) of people, so you could miss out. If they do offer you a higher interest rate, make sure to check it carefully and know exactly what you’re getting into.
Lenders don’t just look at your credit report when you’re applying for new credit, they’ll continuously review all customers and apply ‘rate-for-risk pricing policies’. This could lead to your interest rates being put up if the lender feels you’re now a higher risk. Even if you’ve been the perfect client for them, your rates could be hiked – that’s why it’s so important to get an annual credit score and maintain a good credit report.