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Five common credit report myths busted

Which? separates credit report fact from fiction

A healthy credit report is vital to getting the financial products you want, but how much do you know about yours? Which? Money sets out to separate fact from fiction.

The information your credit report contains will play a big part in determining whether or not you can get a mortgage, loan or even a bank account. 

But recent Which? research reveals widespread misunderstanding among consumers, with 63% of people telling us they’ve never checked their report. Here we dispel five of the most common credit report myths.

Myth 1: Having a poor credit history will put you on a credit blacklist

The credit blacklist is the unicorn of the financial world – everyone’s heard of it, but it doesn’t actually exist. The blacklist is one of the most common misconceptions about credit reports – only a quarter of the people we surveyed correctly identified that there is no such thing. 

Neither is there a universal ‘score’ that lenders use when deciding whether or not to let people borrow. Lenders assess applications against their own criteria, which means that you may be rejected for credit with one company but accepted by another.

Myth 2: Banks are allowed to access your credit report without your permission

When you apply for credit, you’ll be asked to authorise the lender to run a search of your file. Every time a firm searches your credit record, it leaves a ‘footprint’ that’s visible to other lenders. This simply shows when and why your report was checked – it doesn’t reveal the outcome of an application. 

Searches typically remain on record for 12 months, but only with the version of your report that was used. For example, if a lender searches on your Equifax report, this won’t show up on your report from Experian or Callcredit.

Myth 3: Credit reference agencies decide the outcome of credit applications

Credit reference agencies simply supply data to lenders who use this information to assess your application. As well as credit reference agency data, lenders will take into account any existing information they might hold about you, along with the details that you’ve submitted in your application. 

It’s perhaps unsurprising that people are confused about who makes lending decisions as unsuccessful applicants are often told by lenders that they should contact a credit reference agency for further information.

Myth 4: All credit reference agencies hold the same information about you

There are three credit reference agencies: CallCredit, Equifax and Experian. Lenders should share information with all three (typically on a monthly cycle) but it’s likely there’ll be three slightly different ‘versions’ of your credit report. 

This is largely because the amount of personal data in a credit report is growing, with some utility companies starting to share information about customer payment habits, but not necessarily to all agencies. 

Myth 5: Checking your credit report too frequently will damage your credit rating

You’ll never be penalised for checking your credit report, so you’re free to look at any version as much as you like. But our research revealed that 63% of people have never checked their credit report, a worrying statistic given that not doing so could be detrimental to your ability to get credit. 

If there are any mistakes, for example, this could lead to you being unnecessarily rejected outright or paying over the odds to borrow. Checking your credit report can also alert you to any fraudulent activity. It’s wise to check your credit report before applying for a credit card or mortgage.

More on this…

  • Your credit report explained – we outline what information your credit report holds
  • Credit cards for bad credit – a round-up of cards that will help rebuild your credit history
  • Personal loan reviews – find the best deal if you’re looking for a loan
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