Credit reference agencies are often essential in the process of obtaining credit - whether it is a new credit card or a secured loan that you are looking for. But what exactly do they do?
Essentially, credit reference agencies hold data on the credit agreements of individuals. Lenders can request to see these credit reports when deciding whether to loan you money, but only with your consent. Credit reference agencies then use your credit report to produce your credit score, which can be instrumental in a lender's decision to offer you credit.
How do credit reference agencies compile my credit score?
As well as information on your credit agreements - which will include existing loans, and credit cards - credit reference agencies also hold information on County Court Judgements (CCJs) and electoral roll registration. This data is combined with a variety of factors, such as your age, occupation and whether you own property, to produce your credit score.
The most popular credit reference agencies include Experian, Equifax and Callcredit, each of which can be called upon by the UK's main banks and lenders to produce a credit score for an individual. It is important to remember that no credit rating 'blacklist' exists in the UK; if one bank turns down your application for finance due to your credit score, another lender might not do the same.
Know your rights when it comes to credit information
It is important to remember that credit reference agencies cannot provide your lender with your credit score without your consent. This is usually given when you sign a credit agreement with your lender. If you have not signed a credit agreement and your lender contacts a credit reference agency, they could be in breach of the Data Protection Act. The link below will provide further information: Data Protection Act 1998.
To find out more about credit reference agencies and what factors affect your credit score, contact Legal Advice Helpline and we will put you in touch with a legal expert.