Why a free credit report is important to your financial health

For the majority of people in the UK, obtaining credit is an essential part of life’s journey. Whether you want to buy a new house, buy the car you have always dreamed of or secure a discounted holiday before it gets snapped up, your ability to get finance could be the difference between joy and disappointment.

But before you apply, asking for a free credit report could mean potential barriers to your acceptance can be lifted, increasing your chances of getting the credit you need at the best possible interest rate. If you’re about to make a loan application of any kind ask the experts about your current credit status first.

What is a free credit report?

According to the BBC, a credit report is a dossier of information that is held by a credit reference agency. It details your history of borrowing and making repayments, including a breakdown of how you have utilised credit in the past. When you apply for a loan or a credit facility, you will usually be required to give your chosen lenders permission to access your credit report. They will use the information contained within it to assess the level of risk you pose as a borrower.

Why does having a good credit history benefit you?

The most obvious benefit of having a positive credit history is that it greatly increases your chances of acquiring the credit you want. If a lender can see that you have a conscientious approach to making repayments, and that you’re not overloaded with debt, they are very likely to take the risk in lending to you. However, if you have a history of missed or late payments, CCJs and bankruptcies, lenders may take the view that there is a significant risk of you not keeping up with your repayments.

Many lenders also use a credit report to ascertain the rate of interest you should pay on your loan. If you have a good credit record, you may be rewarded with a low interest rate. However, lenders may feel that they need to secure a higher rate of return from you if the risk of lending is elevated.

It is always a good idea to obtain a free credit report before you apply for credit, as this gives you a chance to put things right beforehand. If there is inaccurate information on your file that adversely affects your credit status, this could end up with you paying more than you need to in interest charges. But have this information removed, and you can apply for credit in the knowledge that you will be getting the best possible deal.

Contrary to popular belief, regular credit checks do not affect your rating; however, several applications in a short space of time might. In order to reduce the chances of a rejected application and secure an affordable rate of interest, checking your credit status in advance could help to keep your financial affairs in good order.