When you apply for a new credit card or mobile phone contract or try to get a bigger loan such as a mortgage, lenders want to examine your credit history. This process is also sometimes done when you apply for a position involving financial responsibility, such as in a bank or insurance company. A credit search includes assessing the total amount of credit extended to you and how you’ve managed your repayments. Lenders or employers will look at this information to see whether you are likely to be able to pay back any money they lend, or to see whether your financial situation could put you at risk of being tempted to steal or commit fraud.
What Information is Included in Your Credit Report?
Your credit report will have the following key pieces of information about you:
- Address details – both your current address information taken from the electoral roll, as well as any recent other addresses.
- Details of any credit agreements, such as loans, credit cards, mortgages, and overdrafts, including records of any missed or late payments. The report will also state who the credit is owed to, and the total amount of money owed.
- Legal information about debt and repayments, including county court judgments (CCJs), bankruptcies, and insolvencies.
- Financial associates, if applicable. This could be someone you’ve taken out a joint mortgage with or have a joint bank account with. Lenders may consider this other person’s financial behaviour when deciding about your credit application. Someone at the same address, who you have no financial links with, is not a “financial associate”.
What Information is Not Included in Your Report?
There are lots of myths and misconceptions about what information people can see when they run a credit check on you. Your credit report does not include information about your employment history, savings accounts, criminal record, medical history, ethnicity, religion, marital status, or political affiliation.
How do Lenders and Other Organisations Use a Credit Report?
Lenders take the information contained in your credit report to look at how you manage your finances. Each lender has their own criteria about who they will lend to, so they analyse your credit score along with other details you provide, such as your occupation and income, to decide whether you meet their criteria as a suitable candidate for lending. Their primary aim is to decide whether you are likely to pay back any money which they lend to you.
Organisations can only access your credit report only if they have a legitimate business reason to do so. Additionally, organisations may access certain aspects of your credit report such as your address history to verify your identity, which helps in fraud prevention. If you are being asked to undertake a credit check as part of a job application, your employer will have to get your consent first. Any credit check as part of the process for getting a new job is a soft check and won’t affect your credit score.