View more on these topics

Would you credit it?

It is a sobering thought. Somewhere, there is a file containing information on almost every financial move we make. It may include financial information about our parents, children, spouse, flatmates, neighbours or a complete stranger. It is our credit-rating file.

When I dipped a toe in the water with this issue on the Interactive Investor website, I was inundated with stories and questions. Of the 35 per cent of people who had already seen their credit reference file, some found inaccurate and bizarre information about themselves. Others discovered things they would rather not know about their family&#39s finances.

But by far the most comments were on the power wielded by lenders and the apparently illogical judgements they make. Many users said their file had no apparent black marks but they were still refused credit.

One user, Joanne, presents a theory on this. She says: “I have a feeling that credit card companies are refusing people because they will not make enough money out of them. With so many low interest deals and so many people applying, they are in a position to pick and choose.

“If your credit history indicates that you are using them for a short-term low-interest loan, then they might not be interested.”

It seems this aspect of the industry is due for an overhaul. But the confidentiality aspects of credit scoring allow some lenders to push their commercial interests to the limit.

The UK&#39s two credit reference agencies, Equifax and Experian, collect literally millions of records every month. They are sent information from financial institutions, shops and commercial businesses which are licensed to offer consumer credit and process more than 2,000 credit checks every day. As the agencies do not make the judgements on credit-worthiness or keep blacklists, the information they provide to lenders is effectively a guide to how likely borrowers are to default on debt.

It is then down to the lenders to decide whether to offer credit. When you consider that there are currently over 100 million credit, debit, charge and store cards sloshing around the UK, it makes sense to have some kind of central point of information so lenders can make responsible judgements. Sensible customers do not want to subsidise the defaults of others.

But Experian is fed up with unsuccessful credit applicants being told its files are the problem when, more often, the real reason is their genuinely poor credit history or the lender&#39s judgement. It is pushing for wider use of the Guide to Credit Scoring which came into force in March but which has so far not been applied whole-heartedly. The guidelines require a lender to explain why it has declined an application but only if the applicant asks.

It is time that everyone took a regular look at their own credit-reference file. This typically contains information on past and present add-resses, electoral roll details, any applications for credit plus details of arrears, defaults, county court judgments and bankruptcy. It may also include similar information about a spouse, parents and any adult children or flatmates.

Lenders claim this often indicates how much financial pressure you are under or when children are likely to learn bad credit habits from parents. This shocks many people who apply for their file.

It is time we took a stand on the fact that some lenders still place such high importance on the credit histories of our relatives. Interactive Investor user Sam was refused a loan and later told that the source of his poor credit history was his mother&#39s financial position. He says: “I have not lived with her for 12 years. I requested a disassociation from her and, when I eventually received my credit rating, there was no history of bad credit at all. The whole episode was unnecessary and quite stressful. I was left feeling very bitter about this. If there was to be more exposure of this subject, then I am sure that the current practices would be changed.”

Another site user, Yanxman, says: “I got a copy of mine after being refused a credit card. I was shocked and embarrassed to also get information on my mother&#39s and my deceased sister&#39s financial status. Nothing in it, though, to explain why I was not eligible for a credit card.”

Research reveals that 23 per cent of people aged between 18 and 65 would have credit applications rejected by UK banks and building societies. A so-called credit underclass of more than eight million people (one in five) are blacklisted and cannot use plastic or take up any kind of credit agreements. Many of these are turning to loan sharks and facing interest charges of up to 300 per cent.

It is thought this has come about as a result of automated credit-scoring techniques used by lenders.

To get a copy of your credit files, send a cheque or postal order for £2 to the following credit-reference agencies, including your full name and details of your addresses over the last six years plus moving dates. Sign and date the application.

l Equifax, PO Box 3001, Glasgow, G81 2DT (tel: 08705 783783 or email:

l Experian, PO Box 8000,Nottingham, NG18 5GX (tel: 0115 976 8747 or email www.


Give Nationwide credit for daily interest

I read with interest the article, IFAs&#39 anger over Nationwide Cat on mortgages (Money Marketing, April 5). I do think that this is being unfair to Nationwide because although it has applied a Cat standard across the range of products (and what&#39s wrong with that?), Nationwide – unlike the Halifax – gives daily interest automatically […]

Scottish Life International launches 5th Income & Growth Bond

Scottish Life International is launching the fifth in the series of its Income & Growth Bonus Bond, the first four of which achieved combined sales of £200m since February 2000.Series 5 of the Income & Growth Bonus Bond offers either gross annual income of 11.2 per cent each year or 2.7 per cent each quarter […]

Zurich Financial Services cuts 550 jobs

Zurich Financial Services is cutting 550 jobs which will see 170 staff made redundant at its Swindon and Cheltenham offices. The cuts follow the merging of Zurich&#39s UK and international life businesses.Zurich says the cuts will save £65m a year, representing 15 per cent of the company&#39s operating costs, although no jobs will go within […]

TMO steps up its discount rate mortgage

The Mortgage Operation has introduced the exclusive triple discount mortgage.Aimed at both first time buyers and existing homeowners, the mortgage has a stepped discount of three per cent for the first three months of the mortgage, followed by a 1.25 per cent discount for the next 21 months, and then a one per cent discount […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and thought leadership.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm