Three of the UK’s major credit reference agencies are Equifax, Experian and Callcredit and are used by lenders to obtain a potential borrower’s credit score.
What Information Do Credit Reference Agencies Hold?
Credit reference agencies hold information about credit agreements a person has entered into, including any arrears, county court judgements (CCJs) and whether or not a person is on the electoral role. This information is obtained and collated when a person gives their consent, usually when they sign a credit agreement. To pass information without consent is a breach of the Data Protection Act.
So what is a credit rating, more accurately known as credit scoring, and how can that be influenced?
Credit scoring is calculated from a range of data in a credit report. The UK Insolvency Helpline has advised this may include:
- Payment history
- Amounts owed
- Length of credit history
- Types of credit obtained
- Number of accounts paid as agreed
- Severity of delinquency (how long overdue are payments and how many have been missed)
- Number of recently opened accounts
Credit scoring allows the lender to make a reasonably accurate decision on the following question: “If I give this person a loan or credit card, how likely is it I will get it paid back on time?”
Free Credit Score
For people anxious to see their credit report, there is generally an opportunity to obtain a one-off free credit score from the credit reference agencies.
Experian has offered the following advice to improve a credit score:
- Pay bills on time. Delinquent payments can have a major impact on the score.
- Keep balances low on credit cards.
- High outstanding debt can affect a score.
- Don’t open accounts just to have a better credit mix, it probably won’t raise your score.
- Pay off debt rather than moving it around.
What to Do if Credit is Refused
If credit has been refused, ask the lender what reference agency was used and whether the agency’s decision was the reason for the refusal of credit. Anyone applying for credit is legally entitled to know which credit referencing agency was used.
This is a good time to take advantage of a free credit score but if it has to be paid for it only costs a few pounds. The Information Commission also publishes a helpful booklet called Credit Explained.
Can Information be Removed From a File?
The UK Insolvency Helpline offers the following advice: generally information is held for six years and then deleted. This will include credit accounts in default, bankruptcy orders, Individual Voluntary Arrangements (IVAs) and County Court Judgements.
However if there is information regarded as inaccurate, for example a debt which has been paid in full and shows on the report as unpaid, the lender should be asked to contact the credit reference agencies to have the entry corrected.
This information is obtained from the reputable sources listed below and is offered in good faith. However anyone seeking further help or clarification should consult an appropriate financial adviser or the Citizens Advice Bureau.
The UK Insolvency Helpline
Martin Lewis Money Saving Expert
Experian
Equifax
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