Your credit report contains a vast amount of vital information about your financial history - but many people have never seen theirs.
As a business owner it is vital that you keep on top of your credit report. It will determine whether or not you are able to secure credit, and on what terms. A regular read of your report will also help to protect you against identity fraud - a huge and growing problem.
In the past, though, checking your credit report could be expensive. Although many of the credit reference agencies offer free trials of their service, it is easy to forget to cancel them - and then you are landed with big monthly payments just to see your own data.
But a new service called Noddle offers free access to your report for life. So what is Noddle, and why do you need it?
Why do I need to check my credit report?
It is important to keep track of your credit report for two key reasons.
1. Credit applications
If you are intending to apply for credit, you can help to get a handle on whether or not you are likely to be accepted, and on what terms, by checking your credit report. This holds information that will be considered by lenders, including your payment history and your current debt position. Some of the factors that may affect your credit ‘score’ are investigated below.
2. Fraud prevention
Fraud and identity theft are growing problems. According to the BBC identity theft is increasing at a rate of nearly 500 per cent a year. The Association for Payment Clearing Services estimates that more than £1.6 million worth of fraudulent card transactions occurs in the UK every day, with one such transaction taking place every eight seconds. Fraudsters may try to apply for credit in your name, and a regular check of your credit report is one of the key ways in which you can combat this.
What factors affect my credit ‘score’?
The first thing to note is that there is not really any such thing as a credit ‘score’. The score presented by some credit reference agencies is actually just a simplified way of representing the various factors that impact your perceived creditworthiness in aggregate.
There are many of these factors. The key ones include:
1. Payment history
Your pattern of payments is one of the key factors that will determine whether or not you are likely to be offered credit, and on what terms. Recent missed payments will count against you, and multiple consecutive months over which you have failed to make payment will be of severe detriment.
2. Number of credit lines
The number of credit facilities you have open will also have an impact. A higher number is deemed to be negative.
3. Percentage of credit used
Many lenders consider the percentage of the total credit facilities in use. Lenders do not disclose their methodology here, but many commentators suggest that those who use a lower proportion of their total available credit will tend to be treated more favourably.
4. Search history
The number of recent searches of your credit file will have a bearing on your perceived creditworthiness, as this is a proxy for the number of recent credit applications.
5. Public data
All lenders will consider information on the public record including bankruptcies and county court judgements (CCJs).
6. Financial connections
Finally, lenders may take into account other individuals to whom you are deemed to be financially connected. It is important that you regularly check your credit file in order to ensure that you are not incorrectly linked with other individuals. It is reasonably common, for example, for people to be erroneously linked to previous tenants at their address.
How does Noddle work?
Signing up for Noddle is very simple. You need to provide some basic details about yourself, including your name, your current address, and your previous addresses up to the one in which you were living four years ago. Provided that you are on the electoral roll, Noddle will then be able to locate and display your credit report instantly.
You may be asked to sign up for a number of other ‘alert’ services that are designed to help you keep track of changes on your credit file. It is important to note that these services are chargeable, but that you do not have to sign up for them in order to see your report.
What are the other options?
Noddle is not the only way in which you can check your credit report. Each of the major credit reference agencies, including Experian and Equifax, offer limited free access to your report, generally through a 30 day trial. You can apply for these through each of their individual sites - but you should remember that you will be charged each month unless you cancel your account within the trial period.
You also have a statutory right to see your credit report by post. This costs £2 per report, per agency. Again, you can apply for this through each of the agencies’ sites.