How your credit report affects your loan application

A credit report is one of the main things lenders can use to understand how well you’ve managed borrowing in the past. It can help them decide how much to give you and at what rate – if, indeed, they allow you to borrow at all.

Despite so much riding on it, research from Experian in 2021 found that almost half (46%) of us have never checked our credit report – a figure which jumps to 65% among 18 to 24-year-olds. Just as concerning: 69% of people don’t know what their credit score is.

Whether you check your credit report often or not, applying for a loan, credit card or even a new mobile phone contract will likely result in a credit check. So just what information does a credit report hold about you? And what will it reveal to lenders?

What information does a credit report have?

What information is not in my credit report?

What's the difference between a credit report and a credit score?

What can lenders see in my credit report?

How does my credit report affect my loan application?

How can I check my credit report?

What happens if I apply for a loan with bad credit?

Final words

What information does a credit report have?

A credit report gives lenders a snapshot of your financial history – what you’ve borrowed, whether you pay your bills on time and how much debt you have, as well as how many times you’ve applied for loans, whether you’ve missed any payments and if you’ve had any County Court Judgments filed against you, or bankruptcies.

As well as listing credit agreements, there may be details of your accounts with utility companies, internet service providers and mobile phone networks, as technically these class as loans too (you get the service upfront and pay later).

But that’s not all – current and previous addresses also show if you’re on the Electoral Register, as well as financial links to other people, such as a joint mortgage or bank account with your partner. When you apply for a loan, their credit history may also be scrutinised as it may affect your own ability to repay money.

Finally, the report also flags up any time a company has checked your credit record, although these disappear after one to two years. These are often referred to as credit checks or searches. There are two types: soft credit checks and hard credit checks. We explain this further in the section: “What can lenders see in my credit report?”

Whether you’re looking to apply for a credit card online, make a mortgage application, get a short term loan or negotiate an overdraft, lenders will use all this information to assess how reliable a borrower you’re likely to be.

Anyone over the age of 18 who has borrowed money from a financial institution or taken out a mobile phone or internet contract, for example, will have a credit report in the UK.

Examples of what is included in your credit report:

• Full name and date of birth
• Current and previous addresses
• Current credit accounts, such as loans, bank and credit card accounts, as well as closed or set-tled credit accounts in the last six years. Details include outstanding balance, credit limits and amounts
• Current account provider and overdraft details
• Late payments, defaults and missed payments
• County Court Judgements, Debt Relief Orders and individual voluntary arrangements and bankruptcies
• Hard and soft credit checks
• Fraud information (for example, if you’ve been a victim of fraud)

We once heard a credit report likened to a “financial passport” and it’s a good comparison. Just as border officials use the latter to decide whether to let you into a country, so a credit report can secure your access to money when you need it.

What information is not in my credit report?

Savings accounts and in-credit bank balances don’t get much of a look-in on a credit report as the focus is on credit history, accounts with an overdraft facility will get reported – but only if you’ve dipped into it, not if there’s a positive cash balance.

Student loans aren't included in the data collected by UK credit bureaux either. Repayments for these are usually taken directly from your salary or included in your annual self-assessment. ‘Old style’ student loans (those taken out before 1998), however, can still affect your credit score if you miss repayments.

Income/salary details are usually not included, however Equifax has an income verification product that can be run as part of your credit report. This will show your 12-month and six-month average salary and compare to what you have declared as income.

Your credit report will not explicitly state if you own a property, but it doesn’t take a genius to work out whether you are a homeowner as any mortgage agreements will be listed on the report.

Council tax payments don’t feature either – as they’re not a form of credit, council tax offices don’t report them. The same generally goes for insurance payments.

Your medical information, ethnicity, religion, marital status, political affiliation and education details are also off record.

Before lending to you, companies will often check your criminal record for anti-money laundering purposes as part of a credit search. Thus it is not part of your credit score but is part of your credit report.

Examples of what is NOT included in your credit report:

• Student loans
• Savings and savings accounts
• Bank account balance or transactions
• Property ownership and similar investments
• Religion, political affiliation, marital status, race, medical history or other similar personal information

What's the difference between a credit report and a credit score?

A credit report is a detailed record of your borrowing behaviour, while your credit score is more like a grade for your overall performance. It sums up the information contained in the credit report as a three-digit number, which is calculated by credit reference agencies (CRAs) and lenders.

There are three main credit bureaux which each use slightly different scoring systems. Don’t be alarmed if your credit score varies between them.

What credit score is good? This ranges from 881 to 960 (Experian), 531 to 810 (Equifax), and 604 to 627 (TransUnion).

A perfect or highest credit score for Experian is 999, Equifax 1,000 and TransUnion 710.

A bad or poor credit score, which will mark you out as a high-risk borrower, spans 0 to 720 (Experian), 0 to 438 (Equifax), and 0 to 565 (TransUnion).

Generally you should fall into the same category for all of them. The higher the score the better – you’re more likely to be accepted for credit and get preferential lending deals, such as lower interest rates.

But it's not just your credit score that lenders will be looking at, as we explain below…

What can lenders see in my credit report?

Apart from the personal details and financial history mentioned earlier (“What information does a credit report have?”), lenders can also see some searches.

There are two different types of searches – hard credit checks and soft credit checks.

When a lender looks at a credit file they can ONLY see hard searches, not soft searches. Soft searches are not visible to third parties. Which is why it’s always better to opt for a soft search if you want to just check eligibility. These searches have no impact on your credit score and only stay on your file for a year.

Soft searches are high level checks normally done by a lender or credit provider – usually to pre-approve offers. They give lenders basic details about your credit history and confirm your identity. They will show any credit you currently have, any outstanding debts and missed or late payments. Details of anyone you’re financially linked to will also be visible, plus public record information on County Court Judgements, bankruptcies etc over the past six years.

A hard credit search, on the other hand, gives a more detailed picture of your credit history, including if you’ve been turned down for loans or credit cards in the past and when you last applied for credit.

These checks usually stay on your credit file for 12 months, whether you’re accepted for a loan or not, and are visible to other lenders in this period. Too many hard searches, especially in a short timeframe, and lenders may read it as a sign you’re in financial difficulty.

Bear in mind that if you’ve had money problems in the past and missed repayments or defaulted, these will usually be visible on your credit report for six years.

Even if you have a great score and you report looks good with all payments done on time, you should only apply for a loan if you really need it, as applying in itself will affect your credit record.

How does my credit report affect my loan application?

Your credit report will be used by direct lenders to determine if you pose a risk when you apply for loans. They usually set thresholds for credit scoring and affordability – if your score is below the threshold they may decide not to lend to you or to charge more if they do. The more risk the lender thinks you present (in terms of paying back the loan), the higher the interest rate you will be offered.

Normally, the personal loans with the lowest interest rates are given to borrowers with the strongest credit records. You’ll also probably have access to larger credit amounts.

The information contained in your credit report will be used to perform checks, alongside other in-formation in your application form, such as your income and existing financial commitments.

A little-known fact is that your credit report can even affect existing loans. Some lenders review their customers on a regular basis to see if their credit scores have changed and, as a result, their risk status has increased. Despite the fact you may have always paid promptly and are a shining example of good custom, it won’t necessarily stop them from looking at your credit file and making adjustments.

For all these reasons it's a good idea to check you credit report regularly to ensure information is correct, and particularly before you apply for a loan. Here’s how…

How can I check my credit report?

The easiest way is do this is via the three main CRAs who compile the information – Experian, Equifax and TransUnion. As they’re each slightly different you could look at reports from all three, especially if it’s the first time you’re checking or you haven’t looked for a while.

Are credit reports free? Yes, by law all CRAs must provide you with a copy without charging a penny. However, some hide these behind more comprehensive credit checking services for a fee. You can get around this by registering for a free trial (normally 14 days to a month) – just remember to cancel before the cut-off point or you could be charged a monthly fee.

Some providers offer a continuous free credit report service. These include services such as Credit Karma (by TransUnion) and Clear Score.

What happens if I apply for a loan with bad credit?

Getting a loan from a direct lender with bad credit can be difficult – but it’s not impossible. You might be offered a smaller loan than the one you applied for and should also be prepared for higher interest rates. These loans are normally for periods of a few month to a year and often referred to as short term loans.

You could consider applying for a bad credit loan from a specialist lender. These are usually unsecured personal loans designed for those with poor credit histories – or no credit history at all. They invariably come with high interest so they’re not a good long-term borrowing option, and you’ll have less choice in lenders. On the plus side, you’re more likely to be accepted than for a standard personal loans, and you could improve your credit score if you make repayments on time.

Before applying, review your budget to work out how much you can afford to borrow each month. If you’re looking at secured loans, which generally give the option of borrowing larger amounts with lower interest rates, understand that your asset could be in jeopardy if you miss repayments.

As always, shop around to find the best deal and compare loans. You can use eligibility checkers online to gauge the likelihood of being accepted without affecting your credit score.

Final words

The information contained in your credit report can be a deal-breaker for anyone looking to apply for a loan or get a credit card easily. Understanding what’s in it and checking the details regularly are therefore crucial.

Once you’ve got the information, you may want to work on getting it in better shape. Take a look at our 10 simple steps to improve your credit score, covering everything from credit rebuild cards to consciously uncoupling from poor financial partners.

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