CREDIT REFERENCING
Introduction
Our credit history is logged with credit reference agencies; in the UK these are known as Equifax, Experian and Callcredit. These agencies collect and store data about you, including personal credit history, electoral register history and financial associations with other people. This data is provided by banks, lending institutions, mobile telephone companies and any company who essentially grants you credit. It produces a financial picture of you, which is accessible to companies who want to see your credit track record.
Assuming your credit history is good, then this will be reflected within the report. Adversely, if you have missed or made late payments on your mortgage, loan, credit card, etc, then this will also be shown within the report. Lenders like to see applicants who are reliable in making payments on time.
Strangely, if you have never had any credit historically, this can also work against you, in that the lender has no track record to view. Therefore, they can’t make an assumption that you will make the required payments on time in the future. This is one problem that can face first time buyers.
Credit Scoring
Credit scoring is used by lending institutions to build a financial profile of an applicant, using a statistical analysis of their credit history and personal circumstances. This profile is compared to previous applicants with similar circumstances to predict the likelihood of their satisfactory repayment conduct.
This score can be calculated in different ways by different lenders, so to pass the score with one lender could mean a fail with another. Lenders also continually adjust their credit scoring systems, so one can’t assume that if you passed last year that you will today, even if your circumstances have remained the same.
If a lender uses credit scoring to assess your application and subsequently declines your application, you have a right to appeal under the Data Protection Act.
For further information, please follow the links to the Experian, Equifax and Callcredit websites provided in the footer.
Details updated: June 20 2010
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