What is a credit reference agency?
Credit Reference Agencies (CRA) are also referred to as credit bureau. CRA’s hold and share information about your financial situation. It is where you are ‘credit checked.’ CRA’s are responsible for credit scoring.
CRA’s manage data, including:
- Personal details: your name, date of birth, address and whether you’re on the electoral roll
- Financial associations you have with others (e.g. partners)
- Details of applications you’ve made for credit
- Payment statuses and balances for accounts including current accounts, banks, loans, mortgages, utilities and mobile phones
- Public data, including any county court judgments and insolvencies
CRAs keep data for six years. Information is shared with other lenders, participating in data sharing schemes. CRA’s and lenders are regulated by the Financial Conduct Authority. Individuals cannot see your data. Some lenders subscribe so they can see everything. Others just see a list of defaults or public data, like County Court Judgments.
Companies you have accounts with update your information monthly. Consequently, the CRA has a record of the balance of each account and details of repayments made. Importantly this includes information about missed payments and defaults. If you have an overdraft or credit card, any available limit you have remaining is reported.
What does the credit reference agency use the information for?
Together, this information creates an overall picture of your financial history and current situation. As a result an organisation make a decision about lending to you.
When making an application, e.g. for a loan or credit card, the company you are applying to carries out a credit check. Because of this they can assess your credit worthiness, including your credit score. Each lender will use their own scoring system. Consequently, if your credit score is low, it doesn’t mean you won’t be offered credit. Often the cost for credit will be higher.
The three main credit reference agencies
The three main credit reference agencies are Experian, TransUnion (previously Callcredit) and Equifax. Each agency has its own way of scoring you, which means that you will see a different credit score for each CRA. Higher scores mean you’re more likely to be offered credit with better rates of interest. Even if you have a poor credit score, there are ways that you can improve it.
There isn’t a top credit reference agency. Lenders use different CRAs depending on their preferences, but will use one of the three mentioned above. CRA’s use the information provided to assess the risk associated with offering you an account.
Each of the three main credit reference agencies offer free credit report services. Paid services are also available. Registering to use their services means you can access your credit file giving you a report that shows information on your financial accounts. Soon, you’ll be able to do this for free using the NestEgg app.
Credit reference agencies don’t have ALL your data
CRAs do not hold information about your salary, savings, religion, medical history, any criminal record or religion, ethnicity etc. And nor is there a credit ‘blacklist’ of bad payers.
Make sure the CRA information about you is correct
Making sure that a CRA has the correct information about you is important. You can obtain a free statutory report for this purpose. The Money Advice Service provide a guide to how to check this information.
If you find information is incorrect you’ll need to contact the CRA that provided your report, quote your credit file reference number and provide an explanation of why you believe the information is incorrect, enclosing any supporting evidence.
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