There is a lot of confusion surrounding credit ratings, credit scores, credit
blacklists, credit reports, and credit files. Our simple straightforward guide to
your credit rating aims to give you the facts you need, and is divided into three sections:
- What information is in my credit file?
- How can I obtain a copy of my file and correct any mistakes?
- Credit scores, credit ratings, and credit blacklists
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.
So if you’re worried that a poor credit record may affect your ability to obtain a mortgage or remortgage,
you can use
our online enquiry form, to get in touch with a specialist mortgage consultant.