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Credit reports: what they are and why tenants need to know about them

Posted on 2015-06-16

What’s a credit report & why’s it so important?

  • Credit reports, or scores, are used to help lenders decide whether to loan you money, how much money to give you and how likely it is that you’ll pay them back
  • They’re a record of your financial history – giving lenders a view into what credit you’ve taken out in the past and how well you’ve managed it
  • Your credit history will also be taken into account if you’re a tenant applying for a new rented property, as part of the landlord’s tenant referencing checks

But I won’t be taking out a mortgage or a bank loan – so why’s my credit history important right now?

  • It’s not just used for bank loans, credit cards and mortgages, a credit check could be performed if you apply for finance to buy items such as furniture, new cars or electronics
  • Plus, if you’re applying for a tenancy, your new landlord will want peace of mind that you’re trustworthy and will pay the rent on time, and in full, every month
  • Remember – your rented property is likely a part of someone else’s income or retirement fund. And they probably took out a mortgage for it, which your rent will cover – so they need to be able to trust you to pay

I’ve never had a credit card or loan – so I assume I don’t need to worry about my credit report...

  • Unfortunately, this isn’t the case. In fact, not having had any credit can work against you – as there’ll be less recorded proof of your financial history and lenders won’t be able to as easily predict what your future borrowing behaviour will be

Ok, so can I access this file and see what I’m being assessed on?

  • Yes – and it’s really useful to do so. There are several services that you can use online, either free of charge or for a small cost. The four most well-known agencies are Noddle, Experian, Callcredit and Equifax 
  • Each credit agency will give you their own ‘score’. This score isn’t definitive and isn’t something you should take too seriously, but it will give you a good idea of what lenders might see. What you need to look more closely at is the information they hold about you in your file

I’ve accessed my file and don’t like what I see – what do I do?

  • If you spot a mistake on your file, contact the lender and ask them to remove it. If they refuse, or say it’s not a mistake, contact the credit reference agency and ask their advice
  • If you’ve defaulted on any payments, have a CCJ or have taken out a Payday Loan, it can and probably will bring down your score. However, the impact on your eligibility for credit will lessen over time
  • One of the biggest reasons people have poor credit ratings is that they’re simply not on their local electoral registers, contact your council and get yourself on there
  • MoneySavingExpert has written a full, comprehensive guide on other ways to improve your chances of securing credit, it’s definitely worth a read if you’re worried or simply curious to see how it all works

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