Each year, thousands of applications for loans, mortgages, credit cards, or hire purchase are rejected, following a credit reference check by the service supplier.
In lots of cases, the decision to turn down a request appears incomprehensible: the individual concerned may well have a perfect debt repayment record. Or they may already own several credit cards, none of which are up to their spending limit and on which balances are faithfully paid in full every month.
Credit Rating – How does it Work?
There are mainly two credit reference agencies in the United Kingdom which carry out this activity: Nottingham-based Experian, and Equifax, in Glasgow. Between them, they carry details on 44 million people in the UK. Their data banks include details about your family, credit cards, mortgages, and information on any unpaid bills, failure to pay hire-purchase debts, or County Court judgements (known as CCJs) against you – although they will not appear if paid off within one month. If paid off later, the file can be marked “satisfied” but the information will be on file for six years.
Credit reference agencies will look at the electoral roll for your address to see how long you have lived there, plus the financial details of every adult with the same surname at that address.
Other available information, supplied by organisations with whom you have financial dealings, details how you handle the credit accounts you already have. It is updated monthly to show whether you keep payments up to date. There will also be a record of enquiries made on your name over the past few years, not all of these for lending purposes.
The presence of multiple enquiries, or “footprints” against your name, irrespective of whether a loan or a card application was actually proceeded with, can sometimes be taken to indicate that the individual concerned is a potential “bad risk”.
Checking the Accuracy of Your Credit Rating
Given the multiplicity of these sources of information, it would be rare if a mistake were not made. Equifax, however, claims that out of the 650,000 requests it receives annually from people who wish to see their files, out of 65 million reference requests each year, fewer than one per cent find any inaccuracies.
Inaccurate details-or, better put, details that are no longer accurate-are a major reason why people can be refused credit. So how can you make sure that the information kept on your file is accurate?
Everyone has statutory rights in this regard. These statutory rights were formerly enforced by the Office of Fair Trading (OFT), but a change in law means that responsibility is passing to the Information Commissioner.
When the Data Protection Act is fully in force, about October 2001, individuals will have the right to see all information about themselves, whether it is on computer or not, and to have incorrect records amended.
Under the 1974 Consumer Credit Act, it is already possible to ensure that credit-linked information is accurate. Anyone refused credit for £25,000 or less may write within 28 days to whoever has refused, asking the reason why and the name of any credit reference agency consulted.
It is not mandatory to give a reason for a credit refusal, the name and address of any agency used must be supplied within seven working days. Section 158 of the Act says you can ask the named agency for a copy of your file. The agency must send a copy of the information or tell you if it has no file.
Obtaining a Copy of Your Credit Rating
Equifax and Experian will supply you with all details on your file, as long as you send them a cheque or postal order for £2, a fee determined by the OFT, plus your full name and current address. If you have lived there for less than six years, you should include all your addresses over that period.
The most commonest problems encountered by people who check their files is one where two people with the same surname, but with different credit records, for example a father and a son, live at the same address.
Lenders assume that everyone living in a household with the same surname, are financially connected or dependent. If you can show that your finances are not connected to the other person or people in question, then you can ask for a “Notice of Disassociation” to be placed on your file.
You will have to give the full names and addresses of those involved, and the nature of the relationship you have with the people you want to be disassociated from.
Correcting Inaccurate Information
If the information is wrong it should be removed from the file. In other cases, you are allowed to provide a 200-word statement, called a “Notice of Correction”, which will be added to your file. For example, if you had a CCJ issued against you when you were unemployed then you could explain this in the notice.
Reference Agencies must send copies of corrections to anyone who has asked for information about you during the past six months. They must also use the corrections in future.
If credit denials have become endemic, it is better to be sure that the mistake’s originator corrects it with the agency concerned and then sends you written confirmation of that correction. If you make the correction yourself, you will need to offer proof that an error has been made in your file before it is changed.
County Court Judgements
Assuming you have had a CCJ issued against you, after the bill has been paid, it is possible to obtain a “Certificate of Satisfaction”, which lets institutions know the bill has been paid, although the judgement remains on the credit file for six years afterwards. Should the CCJ have been put on your file erroneously, then you must go back to the firm that originally brought the CCJ and ask them for a “Certificate of Cancellation”.
When this is completed, the Certificate goes back through the Registry Trust, part of the Lord Chancellor’s department, and is sent to the credit reference agencies who will then remove it from their files.
A CCJ can also be removed with a Certificate of Cancellation (or Proof of Payment, in Scotland) if the debt is paid within one month. There are a number of firms which promise to ensure “cancellation” of CCJs from files, for payments of between £50 and £100. In nearly all cases, this is a waste of money for something which you can do quite easily yourself.
Even if you succeed in correcting any errors and omissions in your credit history files, and disassociate yourself from others with a bad credit history, this does not automatically mean you will obtain credit.
This is because while lenders will use information supplied to them by reference agencies, they each make their own individual assessment as to whether to grant credit. One lender’s willingness to offer a £5,000 limit on a card can sometimes be matched by another issuer’s unwillingness even to offer one.
Before deciding whether or not to give you a loan, most credit companies will put your financial details through their own credit “league table”. People who own (or are buying) their own home score higher than those in rented accommodation. And having lived at the same address for years is much better for your credit rating than having moved around.
Being married, having a credit card, and having held the same job for many years are also likely to earn you high points. Age is also important. Generally, the older you are, the more the lender likes it.
Useful Addresses and Telephone Numbers
If you would like to obtain copies of your personal credit file, write to: Experian, Consumer Help Service, PO Box 8000, Nottingham NG1 5GX. Alternatively, a recorded message on 0115 976 8747 will explain how to obtain a copy of a credit file from Experian. Further information is available on the agency’s website at: www.uk.experian.com.
PO Box 3001,
Glasgow G81 2DT.
Its consumer helpline number is 0990 143700.
The Office of the Information Commissioner has an information line – call 01625 545745. You can e-mail them at firstname.lastname@example.org or write to them at Office of the Information Commissioner, Wycliffe House, Water Lane, Wilmslow, Cheshire SK9 5AF. Their website can be found at www.dataprotection.gov.uk. You can also get a free leaflet if you have been refused credit by calling 0870 442 1211.
The Data Protection Registrar information line: 01625 545745.
Consumer Credit Counselling: 0800 138 1111
National Debtline: 0808 808 4000