Why you should always check your credit report

Our credit report is a hugely important document. Yet, most of us don't give it a second thought unless we are about to apply for a credit card or mortgage. Which is perfectly understandable.


After all, it isn't great bedtime reading and do we really need to know what's in it anyway?

We think it is more important for the lender. They are the ones who will consult the report before deciding whether to extend us credit or not.

However, whilst that is partially true, there are two very good reasons why you should regularly check your credit report.


Namely:

  • Identity theft
  • Incorrect information

Identity theft

Apart from ensuring your details and data are correct, another compelling reason to check your credit report is the threat of identity theft.

It is a growing phenomenon which we all need to be aware of and guard ourselves against. Checking your credit report will alert you if someone else is using your credit cards or setting up accounts in your name.

If you suspect you are the victim of identity theft you should immediately notify the police and the credit reference agency.

Wrong information

Without seeing your report you will be unable to correct any errors. Remember, lenders base their decisions on the contents of your report. Any errors or incorrect information may prevent you obtaining credit in the future.

What could possibly go wrong?

Though errors are rare they can happen. A payment may not be recorded or a technical issue with a lender could cause erroneous information to be reported.

If a mistake is made, it needs to be rectified quickly.

At this point, it should be emphasised that the credit reference agencies, the companies which compile credit reports, are aggregators of information and rely on the data supplied to them by the banks and other lenders.

Because of this, if you do spot an error in your report, the lender, not the credit reference agency, should be your first point of contact.

How to correct an error in your credit report

Unfortunately, the onus is very much on the consumer, i.e. yourself, to identify and then fix any mistakes.

To do so is, on the face of it, quite straightforward. Simply contact the lender, present your evidence, and ask for the error to be put right. That's it.

The reality though is that it can often be a long and frustrating process.

If the lender, for example, your bank or credit card company, admit they have made a mistake they must correct the error within four weeks and notify the credit reference agency.

However, if the lender disagrees with you and believes no error has been made, the dispute can be escalated to the credit reference agency (CRA).

Credit reference agency investigation

The CRA may investigate and can amend their records if they find in your favour.

However, if the CRA investigation supports the lender's findings that no error has occurred, the credit report will not be changed.

If this should happen, you are entitled to write a brief 200-word statement, known as a notice of correction, which will be attached to the credit report. Be aware, this statement does not affect your credit score and may be disregarded by lenders when assessing an application for credit.

Bear in mind that each of the three credit reference agencies, Experian, Equifax, and Callcredit each issue their own reports.

Therefore, you should check each report and, whilst they could and do differ, the same error may appear on each report. In this case, you must follow the error removal procedure with each agency separately.

The process in a nutshell

  1. Approach the lender, present your evidence, and ask for the mistake to be rectified
  2. If the dispute is still unresolved, ask the credit reference agency to attach a notice of correction to your file
  3. If resolved, check the report again in eight weeks or so to ensure the error has been rectified
  4. If the dispute is not resolved by the lender, approach the credit reference agency
  5. If resolved, check the report again in eight weeks or so to ensure the error has been rectified