Thin Credit Files In The UK

Thin Credit Files

This page was last updated on 1 September 2021

Thin Credit Files In The UK In 2021

In this article we will look at the impact of having a thin credit file.

What Is a Thin Credit File?

A thin credit file is when you do not have enough information to generate a personal risk score.

This means that in order for creditors to access your credit score, it will be harder for them to make an accurate judgement on whether or not they will loan money to you, and if so, how much they will loan you and what interest rate they will offer you.

Unpaid or several late payments will lead to a thin file and this could make it harder for you to access credit in the future, especially if you want to get a loan, mortgage or credit card.

The result of a thin credit file is that creditors cannot easily make decisions about whether to give you loans or other credit facilities because there isn’t enough information to make an informed decision, and the choices that should be available to them are limited.

Therefore, in order to get more information on your credit file, you could try getting a copy of your credit report. There are a number of different websites that can help you with this.

You can use this information to ensure that the right transactions have been recorded and then dispute any items that have been incorrectly reported or not reported.

Topics that you will find covered on this page

You can listen to an audio recording of this page below.

 

What Are the Consequences of a Thin File?

A thin file means that it will be harder for you to get access to credit facilities, including loans, as you could be perceived as a credit risk.

This could be problematic if you need access to a loan in order to start a business or purchase a home, because the interest rate will likely be higher when compared with people who have been able to build up a thicker file from previous dealings with creditors.

You may also be required to put down a larger deposit, making it harder for you to take out the loan in the first place.

Additionally, if you are offered loans or credit facilities then they will probably come with stricter terms and conditions attached than people who have access to better credit scores.

The interest rates applied to loans and credit cards will be higher for those with thin files, as they represent a bigger risk to creditors.

Why don’t you want a thin file?

You might not want a thin credit file because you want to be able to get access to financial products such as loans and mortgages.

How Can I Build Up My Credit File?

There are many ways in which you can improve your credit score, including:

  • Saving up for a deposit and buying a house or flat outright;
  • Being careful about how you use your current credit and debit cards and ensure there are no missed payments;
  • Paying off any outstanding debt and not falling behind with repayments;
  • Regularly checking your credit file for accuracy;
  • Opening a bank account and staying in credit

Managing your finances responsibly is one of the most important ways in which you can build up a good credit score. It shows future lenders and creditors that you can manage money well.

By ensuring that your file is accurate and up to date, you will also increase the chance of getting better interest rates when you are looking to borrow money in future. If you have a bad credit score it can also help you improve this.

As well as this, if you have an overdraft facility on your current account then using it sparingly can also have a positive effect on your credit score.

Why don’t you want a thin credit file?

A thin file means that the creditor is not able to access enough information to make a decision about you and your financial history, which may put them off from providing you with finance.

This is why it’s important to build up a credit file over time in order for it to be thick enough for lenders to make decisions when considering whether or not you should be allowed to borrow money and at what price.

It’s also important to note that the information on your report may not accurately reflect your credit history as this may change over time, which means lenders may still be wary of accepting you for finance even if your credit file is fairly well established.

This is because it takes time to build up a good credit history and this may not be enough to convince them.

Additionally, if you have a missed payment in the past then it will stay on your file for six years after the date of last payment.

This means that even though you may go through periods where you struggle financially, these defaults will continue to affect your ability to borrow for this length of time.

It is important to note that it won’t be possible to remove these defaults until they are at least six years old.

Are you ‘invisible’ to the financial system?

If you have a thin credit file, then this means that you are ‘invisible’ to the financial system.

This means that major financial institutions may not be able to see your credit history and therefore will not be able to price risk correctly when it comes to deciding what interest rates they should offer you for loans and other financial products.

"Managing your finances responsibly is one of the most important ways in which you can build up a good credit score. It shows future lenders and creditors that you can manage money well."

This means that you may get worse terms and conditions on loans just because of a lack of information.

Some people also have the idea that being ‘invisible’ to creditors is a sign that they have something to hide, for example debt problems, which could be problematic if they ever need to take out a loan in future.

How to make yourself visible

There are various things you could do to improve your chances of having a good credit history, even if you have had problems in the past.

For example, maintain contact with existing creditors and make sure that regular repayments are made on time, or you can risk them giving away vital information about your financial situation which becomes part of your file.

Another option is to check your credit report regularly and then dispute any incorrect information accurately.

This could help you increase the amount of information available on your file, which will be valuable to creditors as it makes it easier for them to make good decisions about whether or not they want to offer you loans and what interest rate they should charge you.

How long does it take for credit reports to update?

It depends on the channel that you use to obtain the credit report, but in most instances it will be instantly.

However, it is important to remember that credit reports are ‘as of’ a certain date, so if you check the file in the morning then this will not be an indication of what has happened in the past 24 hours.

How long does it take to build up my credit history?

It will take around three to four years to build up enough history on your credit file in order for it to be accurate.

However, if you manage your existing accounts well then this should only take one or two years to achieve, meaning that you could potentially apply for loans and other financial products sooner than that.

In any case, it’s worth keeping in mind that if you have a thin file then your credit history will not be as long as those who have been able to maintain good records.

It is important to remember that if you’re going to take out a loan or apply for a mortgage, opening up cards or taking out other loans before this could put you at risk.

This is because creditors are not legally obliged to disclose information about any requests for credit that they have received, which means that the consumer could end up with a loan that doesn’t suit their situation or potentially one that is beyond their financial capabilities.

Additionally, this will be marked against your file for several years before it starts to have any positive impact, so don’t apply for loans that you do not need.

For example, if you are trying to build up your credit history then it is important to just apply for the minimum amount of credit required in order to do this.

This will help you remain within your means and reduce the risk of debt problems occurring in future.

How long does it take for credit reports to update?

It depends on the channel that you use to obtain the credit report, but in most instances it will be instantly.

However, it is important to remember that credit reports are ‘as of’ a certain date, so if you check the file in the morning then this will not be an indication of what has happened in the past 24 hours.

How does having no credit history affect my chances of getting a loan?

It may make it more difficult to get approved for loans and other financial products, even if you have savings or equity in your home. This is because there will simply not be enough information about you to make an accurate assessment of what level of risk you present to creditors.

There is also the chance that creditors will apply a larger interest rate than if you had positive credit history.

Similarly, if you currently have no credit history or not enough to build up one on your own, then it may be worth considering obtaining a guarantor for loans.

This is where another person with a good credit history agrees to be financially responsible for the loan, and this can make it easier to obtain finance as they will already have an established financial track record.

Is there anything that I can do if I am not allowed a credit file?

If you do not currently have any sort of credit file then you can apply for a copy of your credit report through the Credit Reference Agencies (CRAs) and order one from each, as they will all hold their own credit data on you.

The most popular ones in the UK are leading financial services organisations called Experian, Equifax and TransUnion. They are all regulated by the Financial Conduct Authority.

Each of these organisations will have their own credit rating for you based on their own credit scoring methodology.

These reports will list any enquiries made about you, as well as showing any registered accounts and public records.

This may be enough to use as evidence for guarantor loans or to prove that you have an

What is a good length of time to build up credit history for?

You should try and build up a credit history and credit rating that is around three years long before you seek to apply for loans or other financial products.

This will give the creditors an accurate indication of your level of responsibility when it comes to managing your finances, which is important when they consider whether or not you should be given finance.

It is important to remember that the type of product and lender will affect how long it takes to build up a positive credit history, as they may have their own internal scoring system.

It’s also worth remembering that you cannot control what appears on your report and trying to manage or influence this could be seen as fraud and lead to your credit file being closed.

For example, if an account goes into default then it will stay on the report for six years from when it was first opened. This is regardless of whether or not you have since cleared the debt in full.

It is also important to remember that information may be reported by a creditor even if you have paid on time and kept within your credit limit.

This is because the creditor has the option to flag up all of their customers who have made payments that are just below their credit limit as a result of financial difficulties.

What information will be on my credit report?

There will be information such as where you currently live, including previous addresses for six years, and this should be correct as it comes from the electoral roll.

There will also be any defaults that you may have had on your report for six years, such as missed payments to utility providers or service providers, missed tax repayments and county court judgments (CCJs).

If there is a CCJ against your name then it may stay on the credit reference agency reports for up to six years depending on how long it was originally issued.

Additionally, if an account has been paid off in full then you may still see that it is listed as open for another six years after this date.

This is because an account will be held on record for this length of time regardless of whether or not you have made any further payments.

When it comes to applying for credit, this is when the information on your report will be most important as creditors will use this to decide whether or not they will accept you as a customer and at what price.

Can I get a mortgage with a thin credit file?

In general it is possible to obtain a mortgage with a thin credit rating. However, the chances of this will depend heavily on your individual circumstances and most lenders require at least three years’ worth of financial history before they can be considered for mortgages.

This is because most lenders use an affordability assessment when reviewing potential mortgages and decide how much money you can borrow by looking at how much money you make and what other financial commitments you have.

After all, if you cannot afford the repayments then the chances of it going into arrears and generating defaults or CCJs is high.

This means that if you apply for a mortgage with no financial history then the lender may decide that, because

How to fix a thin credit file?

If you have a thin credit file then it is often possible to get this resolved through the use of a guarantor such as a relative or friend. A guarantor will be asked about their financial history and make similar affordability assessments to those made by lenders, but on anybody that they are willing to stand surety for.

This can help to get your report back on track and the best thing about this is that you will be easy to contact should there be any issues with repayments. This allows them to help you if necessary, but also helps the lender to put your mind at ease by knowing that you have someone looking out for you.

Article author

Katy Davies

I am a keen reader and writer and have been helping to write and produce the legal content for the site since the launch.   I studied for a law degree at Manchester University and I use that theoretical experience, as well as my practical experience as a solicitor, to help produce legal content which I hope you find helpful.

Outside of work, I love the snow and am a keen snowboarder.  Most winters you will see me trying to get away for long weekends to the slopes in Switzerland or France.

Email – katy@helpandadvice.co.uk

LinkedIn – Connect with me

Frequently Asked Questions

What Is a Thin Credit File?

A thin credit file is when you do not have enough information to generate a personal risk score.

This means that in order for creditors to access your credit score, it will be harder for them to make an accurate judgement on whether or not they will loan money to you, and if so, how much they will loan you and what interest rate they will offer you.

What Are the Consequences of a Thin File?

A thin file means that it will be harder for you to get access to credit facilities, including loans, as you could be perceived as a credit risk.

This could be problematic if you need access to a loan in order to start a business or purchase a home, because the interest rate will likely be higher when compared with people who have been able to build up a thicker file from previous dealings with creditors.

Why don’t you want a thin credit file?

A thin file means that the creditor is not able to access enough information to make a decision about you and your financial history, which may put them off from providing you with finance.

This is why it’s important to build up a credit file over time in order for it to be thick enough for lenders to make decisions when considering whether or not you should be allowed to borrow money and at what price.

Are you ‘invisible’ to the financial system?

If you have a thin credit file, then this means that you are ‘invisible’ to the financial system.

This means that major financial institutions may not be able to see your credit history and therefore will not be able to price risk correctly when it comes to deciding what interest rates they should offer you for loans and other financial products.

Share this page

Share on facebook
Share on twitter
Share on email
Share on linkedin