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Broker anger over ‘misleading’ Experian credit scores

Brokers say credit scores from credit rating agency Experian are “misleading” potential borrowers by rating them as “excellent” when their credit history shows otherwise.

Firms say clients are obtaining “excellent” ratings from Experian when they may in fact be turned down for a mortgage, due to factors such as defaults or county court judgments.

Perception Finance managing director David Sheppard says: “Experian should be held to account on this. It creates a false sense of hope in clients’ minds as to their creditworthiness and if Experian cannot grade people correctly then it should stop providing a score, unless it is prepared to lend to these people based on its scores.

“People assume their credit scores will cover their entire credit history and to provide something other than that is somewhat misleading.”

Trinity Financial product and communications manager Aaron Strutt says: “People with 10 missed payments in the last year have been given perfect credit scores, which clearly should not have happened.

“It is a bit of a minefield because lenders all use different credit rating agencies and use these scores as a benchmark.”

A spokesman for Experian says: “The Experian Credit Score is an excellent guide to how a typical lender will assess someone’s credit report and we make this very clear on our website. But it is only a guide. 

“The scores we provide cannot be used as a guarantee that a consumer is going to be approved for a mortgage.

“To comply with the Data Protection Act, the score we provide to the public can only take account of credit report information about the individual, whereas lenders’ scores are based on a wider pool of data which can include credit report information about anyone you’re financially connected to.”

“Our scores only show one part of the picture.”

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Andy Wilson, Lincoln 13th December 2013 at 12:08 pm

    The problem is that there is a vast difference between mortgage ender credit scoring and consumer finance credit scoring. The risk of default and loss to a finance provider looking to lend someone up to £500 on a credit card is much less than the potential losses on having a borrower default on a £100,000 mortgage loan, so they can be a little more lenient when facing late payments and arrears on a report. Their product pricing allows for some losses in these circumstances..

    I have just viewed an Equifax credit report that contains four defaults, a CCJ for over £2,500 and a debt management programme, dated within the last three years, and the report gives a score that they claim is ‘good’. Not for a mortgage loan it isn’t.

    The answer is to make your clients aware that buying the credit score with the report is not particularly relevant for a mortgage and therefore not worth paying the extra fee to obtain it. I simply ask them to get the £2.50 full report alone and then let me try and interpret whether they stand a chance of getting the mortgage they need.

  2. Lenders look not to lend at high LTV’s so anything on credit file late/missed payments gives them a way out
    Plus about time genuine mistakes can be removed from credit files and not held for 6 years

  3. When Experian start lending money the credit score they give clients will start to be relevant, I have always told clients that they should take the score/rating with a pinch of salt

  4. Credit scores per se are a bit like art…the beauty is in the eye of the beholder and consumer obtained scores can sometimes bear little relation to the ones specifically written to lenders requirements – Best policy is for the consumer to obtain their full credit report from which the clued up broker can add value to his client by interpreting the information – the problem comes when a lender heavily relies on a score which may reflect a small blip, even though the broker may be aware of this, the lender may have no discretion/process to over rule or review the case ! Catch 22 !
    Statutory reports are available for £2. I have found the easiest online system is the equifax system but even this can be a painful exercise. The data should theoretically be the same at Experian but even here there can sometimes discrepancies…

  5. Everybody likes to see a 3rd party show them in what appears to be a favourable light, so a score in the 900’s and an “excellent” rating can give a feeling of increased self esteem, whereas a low score and a “very poor” rating has the opposite effect.

    Apart from boosting/deflating egos however, the Experian score seems to serve little purpose, and is very rarely an accurate reflection of the information contained in the report itself. Lenders certainly pay little heed to it.

    Scrap the score Experian, and concentrate on providing accurate, up to date information. An adviser worth their salt can interpret the report for their clients, and give them a genuine idea of their true credit-worthiness.

  6. I’m slightly confused by the comments in this article regarding Experian since from what I gather both parties quoted are from well established firms. Therefore I would have thought they’d be well aware of the situation with credit scores from Experian and Equifax in that they are pretty worthless because ultimately a lender will score an applicant based on their wants. It’s our job to find the lender meet the client’s individual needs.

    Isn’t being a mortgage and advisor about making things personal for people as opposed to it being an exact science – that’s what the difference is between a decent broker who will dig for their clients as opposed to expecting everything to slot together nicely immediately.

    This reminds me of an IFA who attended a Trigold function a number of years ago who was complaining because some of the information on the criteria section was wrong – sorry guys that’s mortgage broking. You either need to know your stuff or know where to go to find it out!

  7. Matthew Barsauckas 13th December 2013 at 4:06 pm

    I agree, the score is used as a general fact find, ultimately the lenders internal criteria is the format for decision making. I am surprised at the cost to consumers for monthly updated credit data packages. It is certainly a financial winner for the Credit Reference agencies and an area of income stream that they have unlocked over the past few years.

    I do not know however if these services offer real value, from the comments made above around financial product application success.

    In any case companies such as NOODLE offer consumers a free credit report service online, that provides the same core information as Experien & Equifax ……. Why pay for something that is freely available ?

  8. Re Andrew Charles comment 13th December:

    When commenting on this story I was merely saying that often clients come to us with a false sense of their borrowing potential as a result of Experian implying they had an excellent credit rating and it then falls on our shoulders to tell them otherwise and that, in my opinion, is wrong. I am all too aware of how to interpret a credit report but the average client will not.

    I have no problem in doing advising clients as to their true creditworthiness but Experian should be held to account for giving these people false hope in the first place. As others have mentioned they should scrap the credit score aspect of their operation but I know they will not as it is important to their business strategy.

    As for your other point about Trigold, yes it is a brokers job to do additional research about lenders criteria but again, this is a paid for package and as such it is fair enough to ask for better accuracy. When you pay for a service be that in the sector we work in or even as a consumer outside of work you expect that to be fit for purpose and to say that any company should not be held to account for inaccuracies is plainly wrong.

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