About credit history

Your credit history is a detailed account of all your past borrowing, compiled by credit reference agencies. These agencies gather information from various places, including your payment history, credit limits, high and low bank balances, how much of your available credit you use and even changes in your address and work history. This information is used to create your credit rating.

When you borrow money, lenders will look at your credit rating to determine the risks involved in lending to you. So when you make an application for a loan, for example, lenders can make an informed decision on whether or not to grant credit, or what interest rate to set, based on how you have handled credit in the past. Different lenders will use different criteria to determine your score, however, so they won't all look at the same aspects of your history.

What information is included in my credit rating?

Your credit rating includes data on your borrowing habits, and is used by lenders to assess the level of risk involved in granting credit to potential customers. This includes:

  • Your name, address, date of birth, and any previous addresses.
  • The number of bank accounts and credit cards you have, and how long you have had them for.
  • Information on any court judgements or bankruptcies, and records of any late payments – these will stay on your record for six years.
  • Details of anyone who you share accounts with, such as a spouse.
  • Whether you are registered on the electoral roll.
  • Information on whether you have ever been a victim of identity theft, have committed fraud or have had fraud committed in your name. This information is included in the CIFAS section of your report, which you can read more about on the CIFAS website.

While mortgage payments have always been taken into consideration, rent payments only started having an impact on your credit rating in 2013, and are only included on credit files by Experian, one of the credit reference agencies. This means that whether or not you pay your rent on time could affect your credit rating. The good news is, if you always pay on time and in full, this could help to boost your credit rating.

How can I check my credit rating?

Knowing your credit rating is a good way to keep it on track, or work out where you can improve it. You have a right to view your credit files (known as your 'statutory credit file'), and you can do this online through credit reference agencies Experian, Equifax or Callcredit for a small fee. You can also check it through Callcredit's Noddle service for free.

By checking your rating before applying for credit, you could reduce your risk of rejection – however, be aware that multiple applications for credit and subsequent credit checks conducted by lenders in a short space of time could negatively affect your credit rating.

Why do I have a poor credit rating?

Your credit rating is made up of a number of factors. Things that can have a negative impact include:

  • Lack of information – without any borrowing history, it's hard for lenders to assess how much of a risk you are.
  • Large debts – this could affect your ability to borrow more, as it could appear that you are already struggling with the amount you currently owe.
  • Missed or late payments – these will stay on your record for up to six years.
  • Any county court judgements (CCJs) for unpaid bills.
  • Errors on your record – it's important to report any mistakes as soon as you spot them.

How can I improve my credit rating?

A bad credit rating is not necessarily permanent – there are steps you can take towards improving it. Missed or late payments on loans and credit cards will affect your credit score, so always try to make payments in full and on time. If you expect that you won't be able to make a payment, then it might be worth letting your lender know ahead of the due date. While paying off the minimum each month on a credit card for instance will help in a way to keep your credit rating on track (and help you to build up a more comprehensive history), it is important to be aware that the amount of debt you owe also has an impact on your score.

Monitoring your accounts is also important – the sooner you can spot any mistakes, the better. Make sure you fulfil financial commitments too, as failure to do so may be reported to credit reference agencies.

If you can help it, try not to change address or job too frequently as this can affect your credit history. Being on the electoral roll is a plus point, though, as many lenders will use it to check that you are who you say you are.