Credit referencing and you
For most people, credit is an important part of their life. There are very few people who do not have some type of credit agreement, such as a car loan, a credit card, an overdraft, a mortgage, mail order account or even a mobile phone contract.
Companies want to be fair and responsible when they decide whether to offer these credit agreements to someone. They also want to make sure they have all the information they need to make the decision relatively quickly, that the applicant can afford to repay any credit offered and they want to guard against fraud, which is a serious and growing problem.
To help them with all this they use Credit Reference Agencies (CRAs).
Why do we have Credit Reference Agencies?
In the UK we have a highly developed credit referencing system that gives people access to affordable credit, in the most efficient way possible.
CRAs provide information to organisations to help them decide whether to lend you money or give you goods or services on credit.
- Without CRAs, companies would need to collect information about how you’ve managed credit in the past and other publicly-available information about you themselves every time you made a credit application
- That would make it a very long, slow process and increase the likelihood of decisions being made without all the necessary information as well as heightening the risk of fraud
How does the process work?
Companies that lend you money and those that provide goods and services before you have to pay for them share information about how each of their customers are managing their credit accounts. These lenders include:
- Banks and building societies
- Utility companies
- Mobile phone operators
- Social housing providers
The role of a CRA is to organise this shared information to help make the lending process fair. CRAs donвЂ™t own the data, which is simply a copy of the information all the different lenders hold вЂ“ and they donвЂ™t make any decisions based on it.
This means that when you apply for credit, the lender or service provider can check how reliable you are вЂ“ looking at how you have repaid other lenders in the recent past and how you are managing your current credit agreements.
This means that when a lender needs to make a decision on your application, everything they need is in one place.
What credit reference agencies donвЂ™t do
- Make the decision if an application is successful or not – the lenders make these
- Know which applications are successful or declined
- Know why a person may have been declined credit
- Hold information about people’s race, religion, sexuality, political beliefs or medical history
- Have a black list of people or properties to whom lenders wonвЂ™t give credit
What credit reference agencies do
- Hold factual information as provided by lenders and public records
- Put information they receive through tests to find inconsistencies or obvious mistakes. It’s then regularly tested after that
- Update the information they hold every four to six weeks when lenders provide updates
- Work with people to ensure their credit report is accurate and up to date and facilitate the investigation and correction of information that has been queried as inaccurate
- Store information securely with access in line with the Data Protection Act
Who can do a credit check on you?
In the vast majority of cases the only person who can carry out a credit check is yourself and people you give permission to. If you make a credit application, part of the process will include giving the potential lender consent. Credit information is private and you can’t check another person’s credit report.
There are very limited scenarios in which a credit check can be carried out without consent, e.g. when the police are investigating crimes.
How can you look at your own credit report?
At Experian we offer people two credit monitoring products to meet their needs. The ВЈ2 Statutory Report is designed for those that want to ensure all the information filed on their credit report by third party organisations is accurate and up to date.
We also offer a membership product called CreditExpert, which is designed for those that actively want to understand, manage and improve their credit rating before they apply for credit.
What can you do if you disagree with anything on your credit report?
- If you disagree with something on your Experian Credit Report, contact us to let us know
- We will then speak to the lender who provided the information to ask them to investigate and confirm if everything is accurate
- You can also add a notice of correction of up to 200 words where you can explain the information held about you. This makes sure that any future application for credit is вЂreferredвЂ™ when it is being processed вЂ“ in other words, the lender must read and take account of the notice
- If the lender agrees that the information in question is incorrect, your records will be updated by the lender
- In the case of a mistake in your credit account information, an amendment has to be authorised by the lender concerned because that lender owns the information
- If the lender disagrees that the information is incorrect and you cannot come to an agreement, the issue can be referred to the Information CommissionerвЂ™s Office who will review the case and make a ruling on the matter