Your credit report is essentially an overview of your borrowing behaviour. It's a personal history of the credit you've had and the repayments you've made, from mobile phone accounts to mortgages and more, and lenders use it to help decide if you'll be able to make new repayments on time. It could make all the difference between being approved or refused for credit.
How lenders work out your credit rating
Lenders look for proof that you're a reliable and responsible borrower. They weigh up the relevant information they have at their disposal largely based on your actual credit application, any information they already have on you (for example if you are already their customer) and your credit report from a credit reference agency like Experian. Usually, a higher credit score means you're seen as lower risk meaning you're more likely to get credit, and at better rates.
Ignore the details at your peril
Check that your credit report is up to date, and that the information on it is accurate and reflects your current circumstances. If you do find anything that needs correcting, contact the relevant lender and ask for an amendment. Even small details like the way your name and address is recorded could have a significant impact.
Ways to improve it
Simple steps can help, like registering to vote at your current address, closing any unused accounts or adding a "notice of correction" (up to 200 words) explaining if special circumstances caused payments to be missed in the past. Also, review financial links to other people and ask for any outdated links (e.g. to an ex-partner) to be broken.
30-day trial available to new members only. Monthly fee applies after trial ends. Trial period starts on registration further ID verification may be required to access full service, which may take up to five days.
Keep an eye on good habits
Try to stay within your credit limits and try to pay your credit bills on time every time as missed or late payments can make you look unreliable, stay on your credit report for at least six years, and this can have a big impact on your credit score. To do this you need to be budgeting every month to ensure you have put aside enough monthly income to cover this month's repayment. Use a tool like Money Dashboard budgeting software and always be aware of your bank balance and upcoming costs before making any purchases.
Applying for new credit
When you do apply for credit, try not to make applications too close together, as it can make it look to lenders as though you're under the kind of financial stress that can make repayments tough. On the other hand, some credit is better than none at all, as without a track record of managing credit, lenders may not be able to assess you properly.
Experian Credit Expert: A monthly fee of £14.99 applies after your free trial. You may cancel during your 30-day free trial without charge. New customers only. Free trial period starts on registration - further ID verification may be required to access full service which may take up to 5 days.