But your credit report can hold anything from signs of fraud to mistaken debts, which could damage your financial future.
Credit reference agencies gather personal information about you, whether you’re applying for credit or not. This information can influence the outcome of future financial applications – and if any details are inaccurate, you might not find out until it’s too late.
Here, we investigate the damage caused by credit report mistakes, and what you can do to fix them.
False debts and fraudulent accounts
Of those who checked their credit report in the past five years, 9% told us they found a record of a non-existent debt.
Debts and defaulted accounts are detrimental to how creditworthy lenders consider you, so you could face rejected applications or eye-watering interest rates.
Which? member Neil Foley told us he was demonstrating the importance of checking your credit report to his friend, when he ended up spotting a mistake on his own report.
There had been a debt reported by British Gas that he didn’t owe. When Neil contacted British Gas, he was told that he had no debts on his account and that the matter would be resolved.
But, separately, British Gas told Equifax the data was correct and wouldn’t amend it. Between May and July this year, Neil spoke to British Gas customer service on the phone on seven occasions, never reaching a resolution, and in the meantime had an application for a credit card rejected.
After Which? intervened, British Gas resolved the issue and sent Neil a goodwill payment for the inconvenience.
Another Which? member, Peter, spent more than two years trying to get a mistake removed from his credit report.
His ordeal began in April 2022 when he was rejected for a credit card. His Equifax credit report showed a defaulted account he’d never had with O2, under an unfamiliar address. He emailed O2’s fraud team, then received a letter of apology from its customer services department with confirmation it would remove the account from Equifax.
When Peter checked his report again, the account was still there. He got back in touch with O2, who told him to contact Equifax. But Equifax said it was unable to accept communications from O2 Customer Services – only O2 Fraud – so couldn’t remove it.
The erroneous entry from O2 had once again been uploaded to his credit file. The information was removed, but reuploaded once again. Which? then intervened and O2 removed the default and false address from Peter's file, as well as sending him another £300 in compensation.
Discrepancies and duplicates
It’s not just incorrect debts that can clog up your report: 8% of people who checked their credit report in the past five years found an incorrect current or previous address.
One Which? member told us he was rejected for a credit card and, upon checking his report, found he had no credit history.
This was because his postal address, which he’d listed in his application, was different from his electoral roll address which was used for his credit report. One listed the name of his village and the other didn’t – a difference that left him without any credit information at all.
He had to ask the Electoral Commission to change the address it had, after which his history appeared and he was accepted for the credit card.
Another 7% of those checking found information attached belonging to someone else. One member of staff at Which? experienced this when he found the full credit history of his twin brother in his Equifax file when he checked before applying for a mortgage.
It’s not enough to check one report
There are three main credit reference agencies (CRAs): Equifax, Experian and TransUnion. Each one collects its own data from lenders and open-information sources such as the Land Registry and electoral roll.
This means there is more than one version of your credit report and score – something that 65% of those we surveyed didn’t know. Your reports could be similar or may contain completely different information. It varies from person to person.
Of our survey respondents who said they’d checked their score or report, 70% did so with only one provider.
So, even if you’ve made an effort to check your score or report before applying for a financial product, it might not help if you checked it with a CRA that the lender doesn’t use.
Most lenders just rely on information from one CRA, but they won’t tell you which one they use. Though some lenders, commonly the big high street banks, will check a second or even a third CRA if they don’t get enough information from the first.
Find out more:How to fix a credit report mistake
You can check your statutory credit report for free, though the process isn’t always straightforward.
The credit reference agencies also offer their own paid services for checking their reports, which offer month-long free trials.
Similarly, you can sign up to a free trial of Checkmyfile.com (it costs £14.99 a month if you don’t cancel) and see all three files at once.
If you spot a mistake on your report, you can raise a free Notice of Correction with the CRA. In this, you’ll offer a short explanation as to why the information is incorrect, and the CRA will investigate and either remove the information or refuse.
It’s especially important to check your credit reports before you apply for any credit product, because having an application refused will bring down your credit score.
Find out more:The system needs to be simpler
Which? is calling for the credit reporting system to be reformed so it's simpler to find information and easier to amend mistakes that could have long-term implications for your finances.
The Financial Conduct Authority (FCA) set up a consultation on ways to make the sector more transparent, inclusive and accessible. As part of this consultation, we pushed for a free single portal to allow consumers to access every credit report at once and easily correct mistakes.
The FCA set up a working group to take the work of the consultation forward and make recommendations for reform to the FCA. We want the regulator to take forward recommendations that increase consumer understanding and trust in the system.
Find out more:source https://www.which.co.uk/news/article/credit-report-mistakes-common-and-damaging-aikSa2C9lpqt