Credit Reports

The ultimate guide to credit and how to get it

This stands for annual percentage rate and is the true cost of a deal, including fees and charges as well as interest, over a year. As it includes everything you pay, it can be higher than the interest-only rate. Adverts tend to cite the 'typical' APR, which is what at least two thirds of successful applicants will pay – you may be given an offer of more or less than this figure, depending on your credit status.


Even if you believe that there's no way out of your debts, this should be a last resort. It will wipe the debts out and can officially be discharged in as little as a year but it is recorded on your credit report – your credit history – for at least six years and will make it difficult to borrow in the future. The same applies to IVAs and the new Debt Relief Orders (DROs).


This is the personal history of your credit accounts, from loans and cards to mobile contracts and catalogues, along with your repayment record and other information that helps lenders to decide whether you can comfortably afford to make your repayments. It should be up to date and accurately reflect your circumstances or you could miss out on the deals you want. You can see your Experian credit report for free with a 30-day trial of CreditExpert.

The credit crunch, recession and low interest rates have encouraged many of us to focus on repaying our debts but it's better to ensure that you don't borrow too much in the first place. Before you apply for yet another credit deal, take a look at your credit report. It will give you a snapshot of your financial position and how well you're managing.


This is just one of the fees that may be lurking in a credit agreement – a penalty if you repay the full amount before the date its due. Look out also for arrangement fees and late payment fees when you're assessing possible credit deals.

If you have a joint credit account, such as a card or mortgage, the person you share it with is your financial associate and will be listed in your credit report. Lenders may check the other person's credit report as well as your own, as their circumstances could affect your ability to make repayments. If you separate, you should remember to close any joint accounts and reapportion the debt, or you could be penalised if your ex has money problems.

A guarantor guarantees repayments but isn't the borrower. Say you're a parent acting as guarantor for a student who needs a loan – if your offspring misses payments, you are responsible for the repayments, interest and any penalty charges.


This is making a comeback after years when it was displaced by spending on interest-free credit card deals. Essentially, you pay for an item such as a car or washing machine in fixed instalments. The seller or lender can take the item back if you default on repayments and it is illegal for you to sell it on – you only own the item when you've made the final payment.


Lenders cover their costs and make a profit by charging a percentage of the loan, card spending, mortgage or other form of credit – this is interest. For example, annual interest of 15 per cent means that £15 is charged or paid for every £100 borrowed for a year. More commonly, interest is calculated and added to what you owe far more frequently – daily, weekly or monthly, for example. This is why the APR is so important – it's the only way most of us can easily see what we'll actually end up paying.


If you fail to keep up your repayments, you can be taken to court and a judgment against you may be issued. For example, you may be told to pay what you owe or bailiffs may be sent in. If you pay the debt within a month of the judgment, it can be cancelled. If you pay after then, it will appear on your credit report for at least six years. It will lower your credit rating and make it harder for you to borrow although the entry should be marked as Satisfied if you pay off the debt.