There is a lot of confusion surrounding UK credit ratings,
credit scores, credit blacklists, credit reports, and credit
files. This guide to your credit rating aims to give you
the facts you need.
What's in a Credit File
There are two major credit reference agencies in the UK,
Equifax and Experian, who maintain credit files on virtually
every adult in the country.
Almost all companies that give you credit terms will supply
information to one or both of these two credit agencies.
Therefore, your credit file is likely to contain information
on all your existing credit and loan arrangements, such
as personal loans, mortgages, credit and store cards, bank
accounts, etc. In addition, your credit record will contain
information on any late or missed payments and the amount
of the original debt still outstanding.
The credit reference agency files also contain electoral
roll information for your address and court records relating
to you. It is this information which allows prospective
lenders to confirm your address and also see if you have
any outstanding CCJs.
Whenever a mortgage lender or other company is assessing
an application for credit, they will check the details held
on you by Equifax and/or Experian. The reason they do this
is because, by law, they are not allowed to request any
information about you from any other companies with whom
you have a credit agreement.
Also, by contacting one of these two agencies they can
gain access to your entire credit history with just a single
request rather than having to gather the information from
multiple sources.
Each time a lender makes a search of your credit file,
that search will be recorded and added to your file, leaving
a credit check "footprint". Therefore, it is easy
for a prospective lender to see if someone has been "shopping
around" for credit, and this in itself could be a deciding
factor in whether or not they agree
to give you a mortgage.
Your credit file will also include details of other people
living at your address if they are financially linked to
you, or if the credit reference agencies think they are
financially linked to you. In this way, other people's bad
credit history can sometimes drag down your credit score.
But if you find you are wrongly linked to another individual,
you can write to Experian and Equifax and ask them to correct
the mistake.
How can I see my credit file and correct any mistakes?
Under the terms of the Data Protection Act, the credit
reference agencies Equifax and Experian are required to
provide you with a copy of the information they hold on
you in return for a small administration fee. At the time
of writing (2004) the fee for each agency is £2.
Your details are supplied by post, but you can request
a copy of your file by telephone, post or email. Details
or how to apply can be found on the Equifax and Experian
websites.
Remember that because some companies supply information
to Equifax, some to Experian, and some to both, you will
need to order copies of your file from both agencies in
order to get a full picture of your credit record.
Alternatively, the online service available from checkmyfile.com
will allow you to undergo a free credit score check, as
well as download (for a fee) a copy of your full credit
report.
If, after having obtained a copy of your credit file, you
find that it contains errors, you can take the matter up
with Equifax and/or Experian and ask them to correct the
mistakes. Full details of the procedure for correcting your
file are available
on the companies' websites and are also sent in the post
along with the copy of your credit file.
Credit scores, credit ratings, and credit blacklists
First of all, let's dispel a popular myth.
A lot of people think that there is a "blacklist"
you can end up on if you have a particularly poor credit
history, and that if you are on this list you will automatically
be refused credit.
This is simply not true - there is no such thing as a credit
blacklist. If you have been refused a mortgage or other
form of credit, the reason will be because your credit score
was not high enough.
When a lender requests information about you from a credit
reference agency, they apply a mathematical formula to that
information in order to give you a credit score. Different
lenders will use slightly different factors to create the
score.
Also, the definition of a good or acceptable score will
vary from one mortgage lender to another. Therefore, it
is quite possible to be turned down by one lender but be
accepted for a mortgage by another.
Given that you are potentially worsening your credit score
every time you approach a lender about a mortgage and they
run a credit check on you, and given that different lenders
will have different criteria for assessing your credit worthiness,
it makes sense to talk to the experts right from the start
if you are
looking to take out a mortgage but suspect you may be hampered
by a poor credit record.
If you're worried that a poor credit record may affect
your ability to obtain a mortgage or remortgage, Clean Slate
Mortgages can help put you find a mortgage adviser who specialises
in finding mortgages and remortgages for people with credit
problems.
About the Author
David Miles edits a number of finance websites, including
TheCashClinic.com
- a UK Personal Finance Portal.
