If you’ve applied for a mortgage at some point in the past, there’s a high chance you’ve been subject to a credit check. To conduct this check, lenders obtain information about your borrowing habits from a credit reference agency.
This information is stored in your credit file, which lenders use as part of their underwriting process to decide whether they will lend to you.
As you can imagine, it’s important that the information held within your credit file is correct. So, you may be surprised to hear that mistakes can sometimes occur.
Royal London reports that 29% of surveyed UK adults found errors in their credit reports. This could hamper your ability to obtain a competitive mortgage deal, or even stop a lender from agreeing the mortgage you need.
So, read on to discover why it’s vital to ensure that the information within your credit file is correct, and some of the steps you can take to rectify any issues.
A credit file shows lenders how likely you’re likely to be to pay back debt
Your credit file is a collection of information about your history of debt and borrowing habits. This works as a sort of “report card” that lenders use to help to determine whether they want to lend money to you.
Your credit file will typically contain the following:
- Personal information – this includes your full name, addresses, your past and current employers, and anyone you have a financial association with – such as a joint account.
- Your accounts – any open loans, credit card accounts with up to seven years of monthly repayment records, any accounts you’ve closed in the past, and even accounts you’ve had that were turned over to collection agencies.
- Your payment history – how you have managed your accounts, and whether you have missed any payments or made any late payments.
- Your enquiries – this includes any soft enquiries, which is when your credit file is checked for reasons such as credit prequalification, or hard enquiries, which are requests to review your credit file when you apply for new credit.
- Public records – this is simply any record that is kept on you, such as county court judgments (CCJs), defaults, or bankruptcy.
This information is typically stored in an electronic file at one of the three large credit bureaus: Equifax, Experian, and TransUnion. As such, it may be worth checking your file with each of the credit agencies, as information can sometimes differ between them.
Mistakes on your credit file can be caused by a number of issues, such as miscommunication
As you can see, it’s essential that the information in your credit file shows you as a responsible borrower. However, even if you are, mistakes can sometimes be made.
Indeed, statistics from Royal London show that name or address inaccuracies account for 10% of credit file mistakes, while wrongful listings of debt or credit that you didn’t take represent 9% of errors made.
Even worse, wrongly listed missed payments account for 6% of mistakes made on your credit file, while defaults or sequestrations you didn’t have count for 8%.
These mistakes can be caused by anything from human error, technical issues, or even miscommunication.
Which? states that 60% of its members hadn’t checked their credit report in the last three years, so you may find that mistakes have been made on your file long ago that could come back to haunt you when you apply for a mortgage.
Here’s what to do if you find a mistake on your credit file
While an error such as a wrong name or address may seem like a minor issue, these can significantly hamper your borrowing capability.
For instance, a missed payment can remain on your credit file for up to six years. This could result in damage to your credit score, resulting in you being denied a mortgage when you apply for one.
As you can see, even a tiny mistake on your credit file can have negative consequences, though thankfully, there are steps you can take to ensure your credit file is accurate.
Firstly, you should request a copy of your credit file long before you apply for a mortgage. This way, you can make sure that all the information is correct before you come to applying for a mortgage.
If you do find an error, you should raise this with the credit agency. They will then mark the incorrect information as “disputed” while they investigate the problem. They have 28 days to answer your query from when you first raised the dispute.
You can also submit a dispute with the company that provided the credit agency with the information, which is sometimes referred to as the “furnisher”. If the furnisher finds that the information is an error, it will notify the credit agency and have them update their information.
After contacting the credit agency and furnisher, you can add an explanation to any negative information held on your report. For instance, if you have a missed or late payment, you can detail why you fell behind with them. It may be because you were out of work for a period, but you are back in work now.
This is often referred to as a “notice of correction”, and any lender has to read this information when they check your credit file.
Perhaps the most important thing to remember is that you should ideally request a copy of your credit file long before you apply for a mortgage, regardless of whether you suspect there is a mistake or not.
By doing so, you can rest assured that you won’t encounter any problems due to mistakes when you eventually apply for your mortgage.
It’s also worth keeping in mind that your credit file should only be linked to people you have a “financial association” with. This means that any joint credit agreements, such as a joint loan or mortgage, shouldn’t be linked with someone you’re no longer with, such as ex-partners.
If you do find wrongful financial association on your credit file, you can fill in a “notice of dissociation”, which will unlink any joint credit with former partners.
Get in touch
If you’re concerned about your credit file, or wish to learn ways you can boost your credit score before applying for a mortgage, you should contact us.
Please email enquire@london-money.co.uk or call (0207) 808 4120 to find out how we can help.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.