What is a credit report?

Understanding your credit report and credit score can be the key to healthy personal finances. We break down everything you need to know.

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Understanding your credit report is very important if you’re planning to apply for a loan or credit card. Most lenders will assess your credit report as part of their application process.

In this guide, we take a look at everything you need to know about your credit report and how you can check your credit rating.

What is a credit report?

A credit report is a record of your history of repaying debts. It’s basically your financial CV and a record of your financial life, including accounts you hold, money you have borrowed and information about your identity. It’s there so lenders can confirm you are who you say you are and that you are a reliable borrower.

It includes your personal details and information on your loans and debts. It also includes a record of any financial problems you’ve had in the past.

If you’ve had problems with a high level of debt, then lenders may be less likely to accept you for a new loan. Or you may be offered a loan with higher interest rates than someone with a stellar credit report.

Is a credit report different from a credit score?

In a nutshell, yes. Your credit report is different from your credit score. In fact, you do not have a universal credit score.

That’s because every lender uses your credit report differently and may have a different credit scoring system. All credit reference agencies (CRAs) provide you with a ‘credit score’. But in reality, this is just an indication of what your credit score could be with a lender based on the information they have.

If you have a ‘good’ credit score, then there is no guarantee that your application will be accepted and that you will be offered the headline rate. That is purely down to the lender and whether or not they are happy to lend to you. That said, the better your credit score, the better your chance of being able to borrow money.

What’s included in a credit report?

Let’s take a detailed look at what exactly is included in your credit report. Here’s what it usually contains:

  • A list of your credit accounts – bank and credit cards, loans and utility company debts
  • Details of anyone financially linked to you
  • Information like CCJs, house repossessions, bankruptcies and IVAs
  • Your current account provider and any overdraft details
  • Whether or not you are on the electoral register
  • Your name and date of birth
  • Your current and previous addresses
  • Whether or not you have committed fraud, or if someone has stolen your identity and committed fraud
  • Your credit utilisation rate – the amount you have borrowed versus how much you could borrow

You can find all of this information broken down in your report, so it is worth checking that the details on file are correct.

Any details on fraudulent actions will be held under the Cifas section. Cifas is a national fraud prevention organisation. It can place markers on your credit report if you have been a victim of identity fraud.

How do lenders use your credit report?

Lenders use your credit report to work out whether you’re a reliable borrower. If you apply for a loan or credit card, they use your credit report as part of their application process. They use their own criteria to work out their credit score based on the information in your credit report.

Lenders particularly focus on your payment history and credit utilisation ratio when making a lending decision.

A low credit utilisation ratio shows you’re not using too much of your available credit. This suggests to the lender that you’re doing a good job of managing your credit and not overspending, which may result in a higher credit score.

Lenders use their assessment of your credit score to help them make a lending decision. If you have a higher credit score, then they’re more likely to lend to you and offer a lower interest rate.

How can you check your credit report?

It is possible to check your score for free as all CRAs have an obligation to provide you with a copy of your credit report without charging you. Alternatively, each of the agencies has some sort of full credit monitoring service that you will typically pay for after an initial trial period.

There are three CRAs in the UK: Equifax, Experian and TransUnion.

It’s possible that your credit reports are slightly different from each CRA. That’s because not all lenders share data with all three CRAs. It’s worth checking your credit report with each one because they may well differ depending on what lender has shared what information.

What should you look for in your credit report?

As we have covered, there is no universal credit score. So understanding it can be quite tricky. The scores you get from each of the CRAs will all be different.

So here’s a basic overview of how each CRA presents scores:

  • Experian – Scores are broken down into five categories: very poor (0-560), poor (561-720), fair (721-880), good (881-960) and excellent (961-999).
  • Equifax – Scores are out of 1,000. Good is from 531 to 670, very good is from 671 to 810 and excellent is anything from 811 to 1,000.
  • TransUnion – TransUnion has a slightly different system. Scores are out of 710 but are accompanied by your credit rating. So you will also have your ‘overall credit worthiness’ scored as a number from one to five.

If you are unhappy with your credit score, then there are ways you can work to improve it.

Using credit wisely can help you build or rebuild your credit score. Credit-builder cards can help you get on the right track. Check out our guide for credit cards for bad credit in the UK to determine which is best for you.

How does my credit report affect my credit score?

All the data in your credit report can affect your credit score. The two most important factors are your payment history and credit utilisation.

A good mix of different types of credit can positively affect your credit score. That’s because lenders like to see a healthy combination of different accounts, such as credit cards, a car loan and a mortgage.

Reading a copy of your credit report can help you understand information affecting your credit score. Then you can come up with a plan of action to maximise your credit score.