What is a credit history?


What is a credit history?

One of the key things lenders look at when you apply for a loan, credit card, mortgage or other form of credit is your credit history.

The idea that we’re all labelled with a universal credit score is a common myth. In actual fact, it’s your credit history that matters as there’s no such thing as a universal credit score because every credit reference agency and lender scores differently. In reality, your credit history ultimately helps lenders decide whether to accept your application.    

Confused? Don’t worry - we’ll talk you through all you need to know about your credit history and how to make sure it’s in the best shape.

Wait, what about my credit score?

So if a ‘universal credit score’ doesn’t exist, what do lenders look out for? The answer is simple.

Lenders look at a record of your borrowing over the last six years or so. This is known as your credit history, and helps them decide whether you’re a responsible borrower.

Lenders will check that you’ve kept up with all your current lines of credit and have made your payment on time, for example.  

So, if you’ve had any late or missed payments or ever been issued with a County Court Judgment (CCJ), this will show up on your credit history. And it can impact on your application for a credit card, loan etc. 

When you apply, lenders will use the information on your report to decide whether you’re likely to make your repayments. They will also consider your income and other financial commitments. But in the end, each will base its decision on its own set criteria.

Lenders use one of three credit reference agencies - Experian, Equifax and Callcredit - to access your report.  

This is why it’s a good idea to sign up to check your credit history to get an idea of what lenders see. And the great news is that these three credit reference agencies offer a free checking service.

Noddle, ClearScore or CreditMatcher?

ClearScore offered by Equifax, Noddle owned by Callcredit, and CreditMatcher from Experian are all free credit checking services.

Although each service gives you a unique credit score, each agency scores out of a different total so you’re unlikely to get matching scores from all three. Instead. it’s your financial activity that you should take note of.

While it’s good to keep track of your score each month to see if it’s improving, it’s not what lenders see. Instead, they’ll see a record of how well you’ve managed credit in the past. So any negatives on your report like missed payments or late payments may act as red flags to them.

And this is why it’s a good idea to check your credit history regularly. Any errors on your report can impact on you being able to borrow. If you come across a mistake on your credit history, it’s important that it’s rectified as soon as possible.

You can find out more about how to remove an error on your credit history here.

While Noddle and ClearScore provide you with details of your credit history, CreditMatcher only gives you a score, but comes with the added benefit of matching you to products that you’re likely to be approved for. You can upgrade to CreditExpert, which offers a 30-day free trial and costs £14.99 a month if you don’t cancel.

What if I have a bad credit history?

Whether your credit history has been damaged by missing payments, or you’re borrowing for the first time and haven’t built one up, there are steps you can take to boost your credit history.

If you’ve got a credit card or loan, for example, it’s important to keep on track with your payments. Not only will this help improve your credit history, but it will also mean you avoid your lender imposing penalties on you.

There are several steps you can take to build your credit history, like signing up to the electoral roll, for example. The main way is to borrow responsibly, even if it’s only a small sum – like a credit card with a low spending limit, for example.

You can find out more tips with our guide on how to increase your credit score.  

So remember, while it’s useful to know your credit score, it’s your credit history that matters the most.