Credit reports are compiled by credit reference agencies. Public information like court judgements and the electoral roll are recorded on credit reports, as well as the information that lenders provide about customers and their management of credit accounts. The primary role of a credit reference agency is to allow lenders to share information about the credit history of customers, which as you can imagine is a mutually beneficial arrangement that helps these credit providers combat fraud and avoid bad customers.
However, companies like Experian – the largest credit reference agency in the UK – can also help ordinary customers by providing access to their credit report online. Experian’s Credit Expert service offers members of the public the chance to see their credit report online, which in basic terms means viewing the information that lenders heavily rely on to make decisions about who should be sold different credit products. Given the importance of borrowing for getting by in day to day life, the credit report online can thus be seen as an essential tool in the modern world.
But what do you need to check? Well, there are several important considerations to bear in mind, with perhaps the most obvious being the chance that inaccurate information is recorded on your credit report. While a stringent system of verification is used to check the accuracy of information, the fact remains that the credit report is compiled from data coming from a multitude of sources. What’s more, this information is regularly updated, and each time this happens there is a chance that erroneous data has been provided. Add to this the sheer volume of information that credit reference agencies process and the occasional glitch is statistically certain.
The credit scoring systems used by lenders to assess applications cannot work properly with inaccurate data. Quite simply, mistakes on your credit report can be the difference between being accepted for a loan and being rejected. Often these errors are simple, and easily corrected, such as updating electoral roll information, or your current address following a move.
Checking your credit report can also highlight things that you need to do to prevent the unnecessary refusal of credit account applications. Maybe you are not on the electoral roll in your area? This can cause problems when the lender wishes to verify your identity. Perhaps you have unused credit accounts open, which you have never got round to cancelling? If this is something like an overdraft facility on a current account – which you have since switched from – it still adds to the debt you could potentially get into, should you decide to max out the overdraft. Lenders have no way of knowing that you have no intention of using this credit, and so they may refuse an otherwise sound application for a new account simply on the basis that you are already exposed to an unacceptable level of potential debt.
Checking your credit report can also allow you to guard against ID fraud, because if someone has opened a credit account in your name it will almost certainly appear on your file.
