How does your credit file affect you?
When creditors decide whether to lend you money, they’ll assess your eligibility by looking at your credit file, which is also known as a credit report. Your credit file will show any missed payments, the balance, and the limit. It will also include details of any debt solutions or agreements, such as debt management plans.
We want to help you take control of your finances, so we’ve put together this guide on everything you need to know about your credit file, including information about adverse credit history.
This content is intended to be an impartial guide regarding credit files and how they can affect you. Lowell Financial Ltd does not offer financial advice. You can find out more about the organisations you can contact in our guide on debt help and support.
What is a credit file?
Your credit file is essentially a record of any credit or utilities you’ve applied for or taken out in the past and present, including any information about the payments you’ve made or missed.
In simple terms, it’s like a financial CV showing lenders the following information:
- Electoral information
- County Court Judgments (CCJs)
- Individual Voluntary Arrangements (IVAs)
- Bankruptcies
- What credit you’ve applied for in the last six months
- Any credit agreements you have now or have previously settled (such as bank accounts, credit cards, hire purchase agreements, loans, and mortgages, as well as bills paid to utility companies)
Credit files are compiled and managed by Credit Reference Agencies (CRAs) based on information shared by lenders, utility suppliers, and other publicly available information, such as electoral information and any CCJs/IVAs/bankruptcies. In the UK, the main CRAs are Experian, Equifax, and TransUnion.
How is my credit file used?
With your permission, your credit file can be viewed by lenders to see how you’ve managed credit in the past. This will help them decide whether or not to lend to you, what amount you can borrow, and on what terms.
For example, if you apply for a loan, a credit card, or certain kinds of bank accounts, lenders will usually ask CRAs for information about your file, which is commonly called a credit file check.
Can debt collectors see my credit report?
Yes, if your outstanding loan has been passed on to a debt collection agency then they are able to look at your credit report. This is so that they can access any necessary contact details and review your overall financial situation so that they can make informed decisions about how to handle your debt.
If you've got a Lowell debt, we’ll have access to your credit file and may check this to ensure we have the correct information for you and record any payments. When we review your credit file, it shows as a ‘soft search’. This means it can’t be seen by other creditors and won’t impact your credit score. Your privacy is important to us, and we only ever use your information to help us manage your debt.
What's in my credit file?
Your credit file includes the details you would’ve provided when applying for credit. This is mainly personal information about you and your financial history.
The personal information shown includes:
- Your full name and date of birth
- Your current and previous addresses
- Electoral roll
It also includes financial information about your current and past accounts, including:
- Account open/close date
- Types of accounts
- Account balance
- Account Limit
- Last payment date and amount
- Details of any missed or late payments
- Details of any arrangements in place
- Any defaults on your accounts
- Details of any Debt Management Plans in place
- Any County Court Judgments (CCJs) that have been registered against you
- Details of any insolvencies – such as bankruptcy, debt relief orders, or individual voluntary arrangements
- If you’ve ever had your home repossessed
- Information about people financially linked with you
Your credit file doesn’t contain other financial information like how much you earn, where you’ve worked, or how much you have in any savings accounts.
Generally speaking, if you default on a debt, it will be recorded as a default on your credit file. Similarly, if a debt you had with Lowell has been passed on to a solicitor for legal action and a court grants a CCJ against you, this may show on your credit file. For more information on this, take a look at our Frequently Asked Questions.
Your credit file at each CRA may not be the same because some lenders and creditors may not report their customers’ borrowing and repayment activity to all three CRAs.
How can I check my credit history?
There are online facilities that provide access for you to view your credit file for free. You can find more information about how to check your credit file on the Money Advice Service website.
You don’t have to worry that checking your credit report will show up on your credit file. The fact that you looked at your report isn’t included in your file. It’s worth checking regularly, to make sure the information held is accurate and up to date.
Why is Lowell showing on my credit file?
When Lowell purchases a debt from the original company, the debt is ‘assigned’ to us. A formal Notice of Assignment letter is sent to you to explain this, and from that point, we take over the reporting duty to the CRAs. We are then responsible for accurately showing who that account is owned by and reporting payment information monthly.
This is for both accounts that have or haven’t defaulted. If your account hadn’t defaulted with the original company when we purchased it and you continue to not make payments to us, we’re responsible for reporting the arrears for that account on your credit file. If we send you a default notice letter to let you know your account might default because of missed payments and you don’t respond, we may also apply a default to your account.
How can my credit file affect me?
Companies use the information in your credit file to decide whether to lend you credit or provide services (such as a mobile phone contract or utilities). They are also sometimes used to vet potential tenants by landlords and by some employers when hiring new staff.
If your account has any defaults or missed payments, this could negatively affect your credit file and may make it difficult to borrow money, or obtain services, in the future.
If you’re concerned that your Lowell debt might have an impact on your credit file, we can help. Speak to our helpful team to find out how we can work together to clear your debt with an affordable payment plan, or get in touch with an independent organisation like StepChange or National Debtline for free debt advice.
What is adverse credit?
If your credit file shows that you’ve had trouble making payments in the past, you might have an adverse credit history. This includes if you have accounts in arrears, have had a default or CCJ applied to an account due to missed payments, have had an insolvency arrangement, or have had your house repossessed. This type of information may be visible on your credit file and could make it harder for you to get credit.
There are things you can do that might help lessen the negative impact that adverse credit might have on your credit history. By making payments towards your debts through a payment plan, you can show lenders that you’re taking steps to get your finances under control.
What is a default on a credit file?
A default is entered on a credit file if you’ve been unable to keep up with payments on an account – for example, on a credit card or a loan.
If the debt relates to a regulated credit agreement, your creditor should send you a default notice letter, informing you that the agreement you made has been broken and that the account will default if you’re unable to make the payment. You are given an opportunity to catch up on missed payments to avoid your account being defaulted.
If you’re unable to clear your arrears, a default will be applied to your credit file. It is worth noting that if your credit file shows a default, it might be more difficult for you to apply for credit. There are ways you can improve this, such as making payments to clear the outstanding balance and showing creditors you’re working towards clearing your debt. If your debt is with Lowell, you can set up an affordable payment plan that suits you, either online or over the phone.
Can Lowell register a default?
Yes – if your account hadn’t defaulted with the original company when we purchased it and you don’t make payments to us, we might send you a default notice letter to let you know your account could default because of a lack of payment. If you don’t respond, we may then apply a default to your account. The default will then continue to remain on the credit file for six years.
If a default on your credit file has already been registered by the original company, we’ll show up as the account owner on your credit file once we purchase it. It might then appear that we’ve registered it, even if it was originally registered by the original company. If you think a default is incorrect, or something else isn’t right, please get in touch and let us know.
How long does information stay on your credit report?
As we’ve mentioned, various types of information are recorded on your credit report and made visible to potential lenders.
Positive information, which could include ‘settled accounts’ where you’ve paid off an outstanding debt on time, may be recorded on your credit file for six years. Similarly, most negative information, such as late or missed payments, defaults, or bankruptcies, could also appear on your report for up to six years.
How long do hard searches stay on your credit file?
When you apply for credit (e.g. a mortgage, loan, or credit card), the company will complete a full search of your file to view your financial history. This search is then recorded on your file as a ‘hard credit check’. Generally speaking, most hard searches will stay on your credit file for up to two years.
Whilst hard credit checks aren’t a bad thing, having too many recorded on your file in a short period of time could suggest to potential lenders that you’re struggling financially. This may then make it harder for you to apply for credit until they’re removed from your file.
How long do soft searches stay on your credit file?
A soft credit search is when either you or a company run an enquiry on your credit file. They’re still recorded on your file for 12 months but won’t be visible to lenders, only you can see them. This means that it doesn’t matter how many soft searches are recorded on your report.
It’s also worth noting that they don’t have the same impact as a hard credit check - neither your credit score nor your ability to borrow in the future will be affected by a soft search.
How does paying debt improve my credit file?
By getting in touch with your creditors and making payments towards your debt through a payment plan, you’ll show that you're taking steps to clear your debt, as payments will be updated regularly on your credit file. This may help to improve your credit score.
What is a credit score?
Your credit score represents the information held in your credit file, which is a record of all your financial history, including details about your credit accounts and payment activity. Each CRA uses the information in your credit file to give you a credit score. This might be different with each CRA as they have their own ways of calculating a credit score.
Your credit score highlights to potential lenders (including loans, credit cards, utility suppliers, and mobile phone companies) whether you're likely to make repayments and helps them decide whether to lend you money or provide their services. Normally, the higher your score, the more likely you are to be given credit and on better terms.
If you’re concerned about your current score, we’ve got a separate guide which includes helpful information on how to improve your credit score.
Does fully clearing my balance improve my credit file?
If you’ve got an outstanding debt and work with a creditor to create a payment plan and clear your debt, your creditor should report this to the CRAs in order to update your credit file.
Depending on your circumstances and how you clear your debt, this may be noted differently. We’ll explain the differences between these in the sections below. In any case, having your file updated to show that you've taken responsibility to repay your debts could help if you’re applying for credit cards, mortgages, or other forms of credit in the future.
If you’re a Lowell customer, we want to help you work towards improving your credit score. We know that everyone’s circumstances are different and paying off your debt may seem difficult, but our team will work with you to create an affordable and realistic payment plan suitable to your circumstances.
What does settled mean on a credit report?
If you’ve cleared the full outstanding debt without defaulting, your credit file will be updated to mark the account as ‘settled’. This is to show that you closed your account with no balance outstanding.
What does satisfied mean on a credit report?
If your account has a default, the default will be recorded as ‘satisfied’ on your credit report once you pay the debt in full.
What does ‘partially settled’ mean on a credit report?
If you’re able to come to an agreement with your creditor and pay your debt with a discount, then the default will be marked as ‘partially satisfied’ on your report once the lesser amount has been paid off.
Can I get a mortgage if I’m paying Lowell?
There are lots of different factors that potential mortgage providers will look at when reviewing your mortgage application, including affordability and a credit file check. If you have some debt impacting your credit score, especially if you were unable to make payments and had a default or CCJ applied to an account on your credit file, it might be more difficult for you to get a mortgage. However, if you’re working towards paying that debt with a payment plan, this will show that you’re taking responsibility for that debt.
Working with Lowell to pay your debt through a payment plan demonstrates good financial intentions to mortgage lenders. You can also find out more about this in our other guide on debt and getting a mortgage.
Getting to grips with credit can feel overwhelming, but Lowell can help you take charge of your debt and start your journey to becoming debt-free with us. Get in touch with us today to speak to our team and find out how we can help, or find more helpful guides to all things debt. And if you feel you need advice, there are plenty of companies who can offer you free and impartial support, such as MoneyHelper or StepChange.
Last updated: 12th July, 2024