CREDIT REPORT AND SCORE – It’s More Important Than You Think.

Over the last several years, a credit report has become a FUNDAMENTAL piece of information in a person’s financial story. This report can affect a person’s ability to purchase a home, borrow money or affect their employability. It has become widespread for businesses to perform credit checks on potential employees or clients.

In this article you will learn:

  • What is a credit report and credit score?
  • What information does this document contain?
  • Key elements to improve your credit score?
  • Defining hard credit checks verses soft credit checks.
  • Why do employers check your credit report?
  • How China’s credit report differs from the UK’s?
  • The impact of a bad credit score?

These are important questions for any individual because it can affect their current and Future Financial Success.

What is a Credit Report & Credit Score

Credit Report

A record of your past borrowing and repayment, including late payments and bankruptcy. It is a record of information about your credit history. This report records information from several sources including governments, banks, credit card companies and collection agencies.

Credit Score

This represents your creditworthiness. Lenders use credit scores as a tool to determine who qualifies for a loan, mortgage, credit card or service. It also helps them determine at what interest rate, and what credit limits.  This score can range anywhere between 1 and 1000.


The information included in your credit report;

  • Your name and date of birth.
  • Electoral register at your current address.
  • People you have financial links via joint bank account or loan.
  • How much debt you owe and with whom.
  • Missed bill payments or defaults.
  • If you’ve filed bankruptcy, have a County Court Judgment or an IVA (Individual Voluntary Arrangement)

Lenders are interested in your current financial situation.

A record of your last six years of financial information will be in your report with the most recent information having the greatest impact.

They can display your credit score in a variety of ways. The credit agency could present it as a single number between 0 and 1,000. Depending on what this number is (compared to the top and bottom figures of the scale) will affect the rate of interest you will pay for borrowing.

The higher your credit score on that scale, the better your credit rating. This means you will pay a lower interest on any money you borrow or owe.

A low credit score means you could end up paying higher amounts of interest on any money you borrow or owe.

Some people may not have a good score because they do not borrow money or do not have regular payments coming from their bank account. In that situation, having a low score does not mean your finances are unhealthy. It means you can experience difficulty in borrowing.

Young adults in college or university may not have a financial history or credit report because they do not have financial footprints, i.e. any debts or bill payments.

Credit reports on an individual typically start when they reach eighteen.

The three reputable and recognised companies in Britain for checking your credit report are;

  • Experia
  • Equifax
  • Transunion (formerly Call Credit)

These websites can also assist you by providing recommendations and tips to help improve your credit score. It is good to sign up to one of these websites and find out what your credit report says about you.

It is important to note that each one of these agencies may hold different information about you. Checking all three companies, especially if you want to borrow, take out a service or apply for a job is helpful as you get a thorough look at your full financial story.

Ways in which you can improve your credit rating if you have a low score;

  1. Paying your bills when they are due, this reassures lenders of your ability to manage your money well. Setting up direct debits can help because it takes automatic payment for a bill and on time.
  2. Electoral Register–having your name on this list helps you access credit easier than if you did not.
  3. When an individual has high levels of debt, lending institutions are cautious about lending them more money. Before applying for additional credit, it is good to pay down some of your debt. This is especially if you have a considerable amount of outstanding loans.
  4. Check for mistakes or fraudulent activity. You should contact the credit reference agency and have your report rectified if you identify any errors or fraud.
  5. Keeping a stable address. Moving home often can affect your score negatively because lenders prefer stability and living at the same address for a certain length of time represents that.

I also recommend having an annual credit report check-up, which is like a doctor’s health check. It can help save a lot of money when you maintain a good score and borrowing at reasonable rates become easier. Your credit report will help you know how financially healthy you are.   

I know there are quite a few people who think checking their credit score will affect their credit rating. This is a myth. It is only when you apply to borrow money–e.g. a loan, overdraft, mortgage–or apply for something like a new phone that this may adversely affect your credit rating but only if done often and within a timeframe.

Hard Credit Check vs Soft Credit Check

Know that there are two types of enquiries that can occur on your credit report: hard credit checks and soft credit checks. Only hard enquiries can negatively affect your credit score.

Hard credit checks usually occur when a financial institution–such as a lender or credit card issuer–checks your credit report when making a lending decision. This commonly takes place when you apply for a loan, credit card or mortgage and you typically have to authorise them. It leaves a visible footprint on your report which lenders can view. They can also view if your credit application declined or was successful with other institutions.

Soft credit checks usually occur when a person or company checks your credit report as part of a background check. Examples can include employer background checks, getting pre-approved for credit offers and checking your own credit score. Unlike hard credit checks, a soft check may occur without your permission. However, they won’t affect your credit score.

Why would an Employer check my credit report?

As stated at the beginning of this article, it has become widespread for employers to perform a certain credit check otherwise called pre-employment credit check or pre-employment screening on potential employees.

This credit check differs from your personal credit check in that it can reveal very little financial data for employment.

Employers cannot access your credit score or account numbers in this report.

The main information included in your pre-employment credit check;

  1. County Court Judgements (CCJ’s), Bankruptcies, Voluntary Arrangements, Decrees and Administration Orders.
  2. Candidate’s electoral registration to confirm their current address.
  3. Your full name

Finance and Law organisations legally require firms to perform a pre-employment credit check on their potential employees.

Please note they carry out a Full Credit Check when you apply for certain positions with high levels of responsibility. This normally takes place in law enforcement, the finance industry, or with a government agency (such as HMRC). Your potential employer can view how you have managed your bank accounts, any adverse information and detail around your current balances, limits and levels of borrowing.

Other employers can also apply for a pre-employment credit check on a prospective employee hire, especially if the role they are applying for involves handling money.

Today, the number of employers conducting a pre-employment credit check as part of their recruitment process is increasing.

Included are;

Doctors              Nurses              Care Support Workers                 Teachers            Youth Staff                    Security Officers                              Human Resources Staff                Recruitment Consultants

Many people are unaware that this pre-employment check can be part of the recruitment process. An employer must notify you if they intend to check your pre-employment credit report and must first get your written permission. You can decline your potential employer’s access to this report. Unfortunately, this can adversely affect your job application.


In 2017, an analysis by Reed Screening Database found that 1923 job applicants were turned down for a position because of their adverse finances. The company claims bad debt is responsible for people failing a vetting test 80 percent of the time, making it the most common reason for failure.

A common reason for rejecting a potential candidate is because of what it states in this report. Many employers find this report can flag potential problems they may want to avoid like fraud or theft.

As a guideline, review and monitor your credit report regularly as it can affect your ability to earn a living. Using this report is becoming common, and the trend is more organisations will start adopting this recruitment policy of pre-employment credit checks.

 China’s Credit Report known as a Social Credit Report or Score.

‘China plans to rank all its citizens based on their “social credit”. People can be rewarded or punished according to their scores. Like private financial credit scores, a person’s social scores can move up and down according to their behaviour.’ Business Insider Oct 2018

China’s social credit system goes beyond the Western World credit score behaviour, where it looks into more aspects of a person’s life. Along with how you handle your debts and bills, it looks at your driving records or if you have had any law violations.

Having a low social credit score in China can keep a person from travelling on trains and planes, or hinder their ability to get into a good school, etc.

The main reason for including China’s social credit system here is to show how with time policies and regulations can change.

We have seen a credit report become common in our ability to get a job. It also affects our capability to borrow or take out certain services, i.e. phone contract, etc.


It is good to keep track of what happens with this report. Introduction of new policies or regulation and how it will affect us, these questions should be at the forefront of our minds.

Why? Lest we find our own credit report system infringing on more than our financial story.

Lets summarise – Having a bad credit report affects us negatively.

  • It affects our ability to purchase a home as lenders rely heavily on this report to make an informed decision on whether you are a reliable borrower.
  • A bad report can mean we end up paying high interest payments, therefore wasting money in unnecessary interest charges. This can snowball into further debt if not handled properly.
  • Financial links to family or friends can negatively affect our credit score. If they have a bad score, this reflects poorly on our own report. It can also cause problems or rifts in our relationships.
  • Businesses can deny you certain common services like a yearly phone contract, the ability to rent a house/flat or even accessing gas or electricity. Energy suppliers carry out credit checks for clients to get access to their monthly utility plans. If they decline you,  you will need to get a credit meter.
  • The ability to get a job is one of the biggest issue a person faces by having a low score. Sometimes leading to an ever perpetuating problem of trying to pay off debts without the ability to earn an income. Let us not underestimate how big an issue this can be where lack of confidence, low self esteem, even depression arises.
It is important we educate our young people about the in’s, out’s and importance of such a report on their life and future success. Helping them avoid the mistakes many of us may have made in the past.

I hope you found this article useful and informative. Please leave a comment or sign up to our mailing list to access our latest blog posts.

Some information taken from this article comes from my books; Whats’s Your Financial Gameplan? Book and Workbook.

The information provided in this article is not intended as financial advice. Please contact an authorised financial advisor for specific advice regarding your situation.

Written by Neala Okuromade

  • Qualified Accountant (FCCA)
  • Diploma in Financial Advising (MLIBF)
  • Practising Financial Coach and Author of the successful book series ‘What’s Your Financial Gameplan?’

Neala Okuromade is an experienced and reputable financial coach. Neala is taking on a new cohort of clients looking for guidance and help. Click this link for more 

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