Credit Reference Agencies (CRA’s)

The Dark Mysterious World of Credit Rating Agencies.

Okay, so first off let us clear something up. There is nothing dark, and very little that is mysterious about credit rating agencies, also known as credit report companies.

In the UK, when a consumer applies for credit they will provide relevant information on the application such as salary details, employment details, house owner etc. The lender will then supplement this with information from a credit rating agency, to then decide whether to extend the credit to the applicant. Lenders have all agreed to share their information through the credit reference agencies, so the credit reference agencies hold information on individuals, provided to them by the lenders, and aim to keep it up to date as possible (with 65 million uk residents it is not surprising the credit reference agency information on us all is not always 100% accurate).

The three credit reference agencies here in the UK are Experian, Credit Expert, Equifax and Callcredit. The credit reference agencies compile data including account information shared with them by the lenders, but also other data sources such as Electoral Roll data, County Court Judgements, Bankruptcies and Involuntary Arrangements, Reposessions Data from the Council of Mortgage Lenders, CIFAS (UK Fraud Prevention Service)  and GAIN (Gone away information network). The credit reports compiled by the credit reference agencies also include Searches of your credit file (when someone checks your credit file). Lenders use the credit reference agency data, to make quicker decisions and also reduce identity fraud.

The lenders share the financial data with the credit reference agencies, so they can make a more informed decision by accessing information from all lenders, for example how reliable with payments are you with your other credit relationships. Lenders are concerned by risk, and what to ensure that when they lend to you, that there is the best possible opportunity you will pay the credit back e.g. your loan, credit card debt, mortgage, car finance etc.

The recent financial crisis has put a bit of a strain on this situation, as banks are currently as cautious as they have ever been about lending wisely. If you dont stack up, you wont get the credit. That is all there is to it.

The challenge that credit agencies have, and where things can and do go a little wrong, is that there are millions of people in the UK and it is quite hard to retain that much information without any cross over or error. Just imagine how many James Smith's there are in the UK. How do you know which one is which. One might earn £8,500 per year and another might earn £1,000,000. How can you decide how much to lend to each. How do you know which one is which? If they are still alive? It's exhausting!

How do you fix errors on your credit report

Firstly, you have to have a look. Sounds obvious, but you would be surprised what some people think. Once you have a copy of your credit report and your credit score you can easily see where things are at right now. You can spot mistakes, or things that are simply not true, and ask the credit agency to correct them. Once everything is cleaned up, you can start to understand your credit report, and why you have that credit score. Then you can start to build!

You can start to build your credit score by reading all of the wonderful information we provide throughout our website. But first, sign up below to each of the credit agencies and get your credit report. The most important is Experian's Credit Expert just because Experian are the biggest, but we'd recommend all three to start with as they will be different.

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