Your credit file, read from the inside

Your credit file is a record of how you have used credit and paid certain bills, usually over the last six years. Lenders look at it to judge how likely you are to repay. They also use their own information, such as what you tell them about income and spending, so the file is one part of the picture.

Accounts

Credit cards, loans, overdrafts, mobile phone contracts, some utility and finance agreements.

Payment history

Month by month, whether each payment was made on time, late or missed.

Balances and limits

How much you owe and how much you could borrow on each account.

Public records

County court judgments, bankruptcies and individual voluntary arrangements, and their equivalents in Scotland and Northern Ireland.

Electoral roll

Whether you are registered to vote at your address, which helps confirm who you are.

Searches

A list of who has looked at your file and when.

Financial links

People you share a joint account or joint borrowing with.

What it does not hold: your salary, your savings, your religion, medical details or parking fines. Being married does not merge your files either.

Before you sign: remember that this agreement will add a new line to your file for years.

In the UK, credit files are held by credit reference agencies. There are three main ones. Lenders choose which agencies to report to and which to check, so the three files about you may not be identical.

Each agency may show you a score on its own scale. Those scores are a guide made for you, the consumer. Lenders do not see them. A lender takes the information in your file and runs it through its own rules, which is why one lender may say yes where another says no.

Before you sign: do not let a score shown in an app stand in for reading the agreement itself.

Lenders weigh things differently, but some patterns are widely shared. None of these is a rule that works the same for everyone. They are the reasons that come up again and again.

Before you sign: check how this new payment sits next to the commitments you already have.

A lender should tell you before it runs a hard search. If you are not sure which kind a check will be, ask. It is a fair question and the answer should be clear.

Before you sign: know whether a hard search has already been made, and do not apply in several places at once.

Most information stays for six years. The clock starts at different points depending on what the entry is, and the record of an account in good order can stay as long as the account is open.

Old negative entries matter less as they age, and new on-time payments slowly build a better picture on top of them.

Before you sign: picture a missed payment on this agreement still showing six years from now.

You have a legal right to see the personal data a credit reference agency holds about you, free of charge. Each of the main agencies must provide your statutory credit report on request, and each also offers a free way to see your file online. You do not need to pay a subscription to look at your own information.

1. Ask each of the three main agencies for your file, because they can differ.

2. Check your name, date of birth and every address listed.

3. Go through each account: is it yours, is it open or closed, are the balances and payment markers right?

4. Look at the searches. Do you recognise each one?

5. Check the financial links. Are those people still connected to your finances?

An account you do not recognise can be an error, or it can be a sign someone has used your identity. Either way, act on it straight away.

Before you sign: look at your own file first, so nothing in the lender’s decision comes as a surprise.

Mistakes happen: a payment recorded as late when it was not, an account that was closed still showing as open, an address you never lived at. You have the right to have inaccurate data corrected.

1. Contact the agency showing the error and explain what is wrong. It will check with the organisation that supplied the data. The entry is usually flagged while that happens.

2. Contact the lender too if you know which one supplied the information. It is the lender that must correct its own records.

3. Add a notice of correction if an entry is accurate but misleading on its own. This is a short statement, up to 200 words, that lenders will see alongside the entry.

4. Take it further if you are not satisfied. Complaints about a lender can go to the Financial Ombudsman Service. Concerns about how your personal data is handled can go to the Information Commissioner’s Office. Both are free.

Before you sign: if your file holds a mistake, get it corrected before any new application rather than after.

Be wary of any service that promises to repair or boost a credit file for a fee. Accurate information cannot be removed just because it is unwelcome, and anything you could pay someone to do for an inaccurate entry you can do yourself for free.

• Pay every bill on or before its date. Set up direct debits for at least the minimum.
• Keep balances on cards well below their limits.
• Register on the electoral roll at your current address if you can.
• Close accounts you do not use only after thinking about how it changes your available credit.
• Check your file once a year and after any big change, such as moving home.

Before you sign: ask whether this agreement fits the habits you want your file to show.