What's in a Credit File

There are two major credit reference agencies in UK, Equifax and Experian, who maintain credit files on virtually every adult in country.

Almost all companies that give you credit terms will supply information to one or both of these two credit agencies.

Therefore, your credit file is likely to contain information on all your existing credit and loan arrangements, such as personal loans, mortgages, credit and store cards, bank accounts, etc. In addition, your credit record will contain information on any late or missed payments and amount of original debt still outstanding.

The credit reference agency files also contain electoral roll information for your address and court records relating to you. It is this information which allows prospective lenders to confirm your address and also see if you have any outstanding CCJs.

Whenever a mortgage lender or other company is assessing an application for credit, they will check details held on you by Equifax and/or Experian. The reason they do this is because, by law, they are not allowed to request any information about you from any other companies with whom you have a credit agreement.

Also, by contacting one of these two agencies they can gain access to your entire credit history with just a single request rather than having to gather information from multiple sources.

Each time a lender makes a search of your credit file, that search will be recorded and added to your file, leaving a credit check "footprint". Therefore, it is easy for a prospective lender to see if someone has been "shopping around" for credit, and this in itself could be a deciding factor in whether or not they agree to give you a mortgage.

Your credit file will also include details of other people living at your address if they are financially linked to you, or if credit reference agencies think they are financially linked to you. In this way, other people's bad credit history can sometimes drag down your credit score. But if you find you are wrongly linked to another individual, you can write to Experian and Equifax and ask them to correct mistake.

How can I see my credit file and correct any mistakes?

Under terms of Data Protection Act, credit reference agencies Equifax and Experian are required to provide you with a copy of information they hold on you in return for a small administration fee. At time of writing (2004) fee for each agency is £2.

Sometimes you can qualify for a loan but you should not accept it. Why? The monthly payments are more than you can afford. There are lots of laws in place at state and federal level to protect customers against predatory lending, but there are still many customers around who will find that six months to a year into their loan they might have to give up their house. They cannot afford upkeep, insurance and mortgage payments.

Your mortgage banker is giving you an estimate of how much they think you can afford, typically based on raw numbers such as your credit score, income, and available cash. What is not included in this equation is human factor: Your spending habits. One way to quickly look into your financial future is to use a mortgage calculator.