Correcting Your Credit Rating
Most people require credit at some time, whether it is in the form of a credit card, a loan or an overdraft. However careful you are, it is possible to find yourself blacklisted for credit purposes.
When you apply for credit, the lender will apply to either Experian or Equifax, the two Credit Reference Agencies (CRAs) that provide financial data to lenders, for information to help them make a decision. CRAs hold a regularly updated database of information about consumer credit applications, court judgments and so on.
When a lender checks with a CRA, following a customer’s request for credit, it is logged on that person’s file. A large number of applications from one person in a short time may indicate fraud or excessive borrowing.
Under the Data Protection Act 1998 and the Consumer Credit Act 1974 you have the right to know what information about you is held by a CRA. The statutory credit reference report costs £2. You can see details of who has searched for information about you and request information as often as you wish without a record of this being seen by a lender.
If you are refused credit, the lender is not obliged to tell you why but they should tell you if information supplied by a CRA was material in the decision to refuse credit. The lender should give you the name and address of the agency.
If you think the information is inaccurate, you can make a complaint to the CRA, who must then contact their information provider. Meanwhile, your file should be marked as "disputed" so that prospective lenders realise that the information may not be reliable. Agencies have 28 days to answer complaints.
Usually, people only contact a CRA if they run into difficulties when applying for credit. However, you may wish to know what information is stored, even if you have never had any problems.
Difficulties can occur because at present lenders are allowed to take into consideration information about people with the same surname living at the same address, even if their financial affairs are completely unconnected to the individual seeking credit. For example, if you have children living at home who have debts, it could affect your own credit worthiness.
In 2014, a claimant was awarded £116,000 by the Supreme Court for damage to his credit rating caused when he returned a defective lap-top and stopped paying the HP payments on it, which led to the lender marking him out to be a credit risk and made obtaining future loans difficult.