Why you should always check your credit report

There is a saying that a person's eye are the windows to their soul. But on a more practical level your credit score is a window to your financial health. And that's why you should be regularly checking your credit score - not only do you want to ensure it's improving, but it's also a great way to help detect when criminals are attempting to steal your identity, and to ensure the information within your credit file (which creates your score) is accurate.

Identity theft

Apart from ensuring your details and data are correct, another 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.

It's just... wrong

Without seeing your report you will be unable to correct any errors. Remember, lenders base their decisions on the contents of your report. Any mistakes within it may prevent you getting credit in the future. Though errors are rare they can happen. A credit card monthly payment may not be recorded and therefore it will look like you missed a payment, for example.

Fix it quickly

At this point, it should be emphasised that the credit reference agencies, the companies which compile credit reports, only collect and compile (rather than record) your credit history. Therefore, they rely heavily 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 involved, not the credit reference agency, should be your first point of contact.

You might think it's up to the lenders to sort it out for you, but the onus is on you to persuade them that the data they've sent to the credit agency is inaccurate and should be corrected. Simply contact the lender, present your evidence, and ask for the error to be put right.

But it can often be a long and frustrating process. Lenders don't like to admit they've made a mistake.But if they do, then remember they must correct the error within four weeks.

If the lender disagrees with you and believes nothing's wrong, it's then that the dispute can be escalated to the credit reference agency for investigation. They then have the power to resolve the issue in your favour - or not.

If they do, you can write a 200-word statement, known as a notice of correction, which will be attached to the credit report. This statement does not affect your credit score and may be disregarded by lenders when assessing an application for credit.

And there's another hurdle to overcome too - inaccurate data from a lender may have been submitted to all three agencies, so you'll need to try and correct it on all of them.

In a nutshell, approach the lender, present your evidence and ask for the mistake to be rectified, but if...

  1. ...the dispute is unresolved, ask the credit reference agency to attach a notice of correction to your file
  2. ...it is resolved, check the report again in eight weeks or so to ensure the error has been rectified
  3. ...the dispute is not resolved by the lender, approach the credit reference agency
  4. ... it is resolved, check the report again in eight weeks or so to ensure the error has been corrected