Credit reports: How they work and tips to improve your score


Mortgage applicants will be all too familiar with the importance of ‘having a good credit report’. But what exactly does this mean and how to you achieve a high score? Sonya Matharu and Gemma Bennett of The Mortgage Mum have the answers

Sonya Matharu

Sonya starts us off…

What exactly is a credit report?

Growing up, everybody tells you that you need a good credit report—but more often than not, they don’t tell you what it is, why you need it and how it will impact your ability to do things.

So, let’s dive in shall we?

A credit report is essentially a financial report that tells the story of your borrowing and repayment history.

Compiled by credit bureaus or credit reporting agencies, they gather information from lenders, credit card companies, and other financial institutions that you’ve had a financial relationship with.

It’s packed with all the juicy details about your credit accounts, not just about credit cards, loans and mortgages—but any payment history, credit limits or outstanding balances too.

Think of it like the paparazzi of the financial world—always digging for information to get to know you better!

So, why are credit reports such a big deal? Well, because they provide such a comprehensive picture of your financial history, they’re used a lot.

Essentially, a credit report is like a background check for your finances, so they provide a mine of information for landlords, lenders, and anyone looking to extend you a line of credit—whether that’s with a phone contract, a car lease or utility accounts.

Your credit report helps people to understand how you manage your finances, and this will be the basis of whether you’re accepted or rejected for any type of credit, including mortgages and what the interest rate will be on any repayments.

But credit reports don’t just exist for lines of credit, they’re also crucial for detecting identity theft, revealing any searches made by potential lenders.

Whether that’s a hard search (when an individual applies for a line of credit), or a soft search (when an individual is checked for pre-approval or a background check)—which can help highlight any unauthorised accounts or inquiries, enabling you to catch them early and correct them.

How to take control of your credit report

So, if you want to be the master of your financial destiny, here’s what you need to know.

Take control….

Credit Reports and Credit Scores are different things. Your credit score gives you an overall result to signify your credit health—but it doesn’t tell the full story.

That part is told by your credit report, which details your full financial history. Whilst your credit score is important, it’s not the only thing that matters, so don’t be disheartened if yours is still growing.

Regularly reviewing your credit report is vital as it ensures your information is accurate and up to date.

As for how to improve your credit score—I’ll hand things over to my co-columnist, Gemma, to tell you more.

How to improve your credit score

Gemma Bennett

Over to Gemma…

Here are some ways to make sure your credit report is optimal for you.

Make sure you’re on the electoral roll at your current address

This seems like such a small detail, but it can actually be barrier to lenders if you don’t appear on the electoral roll when they credit search you. It’s certainly not impossible to get a mortgage when you’re not on the electoral roll, but it may limit your lender choices or require more documentation to get to an offer.

To have credit or not to have, that is the question

Having a credit history will help them to understand your financial conduct, therefore, it is helpful to have credit to show. A credit card is an easy and accessible example.

The best way to show a responsible approach to borrowing is to use this credit card each month, for example to pay for petrol. Then each month pay it off in full. This will build you credit history without creating a high debt balance.

Paying your accounts on time and in full each month is a good way to show lenders you’re a reliable borrower, and capable of handling credit responsibly. Old, well-managed accounts will usually improve your score.

Cancel unused cards

If you have credit cards that aren’t being used, you should cancel them and close the accounts. This is because even if you have zero balance on them, they show as potential borrowing.

A lender may feel nervous of that potential debt when assessing your overall case. In addition, leaving these accounts open and inactive leaves them vulnerable to fraudulent activity.

Keep your credit use low

Usually, a lower percentage will be seen positively by lenders, and will increase your credit score as a result. If possible, try and keep your credit utilisation below 30%.  Even if you pay on time and have a good track record for this, if all your lines of credit are utilised to near maximum, this will negatively affect your case for a lender.

Check for errors and flag up any mistakes on your report

Even small mistakes, such as a mistyped address, can affect your score and could cause issues when you apply for a mortgage.

Regularly check the information on it is accurate and up to date. If you do spot a mistake, contact the provider directly and ask them to change it.

Monitoring your credit file regularly helps you to notice any fraudulent activity

If fraudsters gain access to your personal details, they could take out credit in your name without you being aware.

If you see something on your credit report that is wrong, such as an application you don’t recognise you can report this and measures can be taken to avoid repeat incidences of this.

Don’t underestimate the impact of utility bills on our credit report

So much emphasis is put on credit cards and loans when it comes to credit reporting. However, a missed payment to a utility bill can be an instant decline for a mortgage lender in some cases.

Perhaps you’ve moved house and a utility company has sent a bill that you didn’t think was due. Rather than just not paying it because you’ve moved address, call the company and settle the issue, otherwise it will be noted as a default on your report and utility defaults are taken seriously.

Along with mobile phone agreements which often show up as a loan. It all counts as conduct.

A final note… (some reassurance for anyone with a credit blip)

Mistakes happen and missed or late payments are part of real life. The sooner you can rectify this by talking to the company in question and ensuring all payments up to date the better for your future of lending.

If any issues emerge on your report, do speak to a broker. As we always say lender’s criteria varies greatly. And their criteria and appetite around credit history details, is the most varied element I have ever known.

Some lenders have zero tolerance and there are others with a certain appetite, even amongst the high street lenders. A broker can help break it down, understand and navigate the best route, even provide explanations where appropriate that could lead to a better decision outcome for you.

There are also specialist lenders which have policies especially formulated to assist and accommodate applicants with an adverse credit history.

The best advice I can give is to bring it to the light. Get advice. Don’t hide away from this because it can feel uncomfortable.

There’s so many reasons adverse credit issues occur and there’s always a new day to get on top of these things and set it on a new path.

Gemma Bennett  and Sonya Matharu are both senior mortgage brokers for The Mortgage Mum

You can find out more about Sonya and Gemma, their jobs and how they help people with their mortgage journey here.

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