Every time you pay a credit card bill, apply for a loan, or move house, the computers of the three UK credit reference agencies spring into action. Experian, Equifax and CallCredit collect information from financial firms and businesses throughout the UK and then use it to create your own personal credit record.
We do not give consent for this. We are simply told it will happen whenever we open a bank account, take out a new credit card, or pay a mobile phone bill. Once that notification has been given, the banks and other firms can freely pass on data to the credit reference agencies.
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Until this month, the agencies could charge you £2 to supply your credit record, but from 25 May a new European law means that they, like all other organisations, must give you free access to data they hold (see below). Not all agencies hold the same data, so you should get your record from all three. The credit reference agencies will still be allowed to charge us up to £180 a year for a variety of extra services using our data.
What they collect
When they began, credit reference agencies collected only information about loans and other debts, and how we repaid them. Their purpose was to help banks and finance companies make quick decisions about whether to give us a credit card, a personal loan or a mortgage. If we paid our debts on time then we were good for more credit – but over the years their reach has grown. Now it is easier to say what financial data they do not collect rather than what they do. Three things seem unlikely ever to be added – criminal records, prepaid mobile phones and prepaid payment cards. Everything else is slowly being swept into their computers.
Details of mortgages, credit cards, loans, car finance and hire purchase, student loans before 1998 (not more recent ones), and monthly mobile phone contracts and the payments you make are all collected. They will normally know about your current accounts and will know your date of birth. They know your credit card limit, your balance, whether you pay in full or just the minimum each month, and any cash withdrawals. Every time you apply for new credit that goes on your file, too.
Credit reference agencies collect your address from the electoral roll (even if you opt out of making this public), any County Court debt judgments, and details of bankruptcies or similar procedures. A growing number of telecoms and broadband providers share your data, as do many gas, electricity and water providers. The agencies are also planning to collect details of rent and council tax payments.
The new data is supposed to help people who have what are called ‘thin files’. Anyone who has never had a credit card or a loan may have no credit score, which can be worse than a bad one. By sucking up this extra data the agencies hope everyone can be assessed fairly.
What they do with it
The data is used to build up a picture of your creditworthiness. That is why it is very important not to miss payments on your phone or credit card. They will know about an overdraft and what goes in and out of your current account. From that they can model your income and spending. Under new Open Banking rules you will be able to give them explicit consent to get more detailed data, which may help you get a quicker decision on a mortgage application.
Your credit score is an approximate guide to your creditworthiness. The three agencies will let you know your score. They each calculate them differently and the score they give you is not necessarily what a bank or lender will use – they will make their own assessment from the data, including whether they want you as a customer.
However, the better your score the more likely you are to get credit and to get the best rates. The agencies may also tell you which deals you might get with your credit score – and they get paid if you take up these offers.
Putting it right
The data the agencies hold is generally erased after six years. Most firms that use the data will take less notice of problems the older they are. One late payment three years ago is unlikely to affect your rating now.
Data must relate only to you unless you have a financial relationship with someone, for example a joint mortgage or current account. Your spouse, someone who used to live at your address, or someone with a similar name still living there should not affect your credit record. If it does you can apply for a ‘notice of disassociation’ from them.
With thousands of bits of data from dozens of sources, mistakes will happen. If there is an error on your record, you should write at once to put it right, first to the financial firm that provided the information and then to the credit reference agency. However, it can prove difficult to get false data erased or corrected. If the mistake is harming you, then write to the agency demanding its removal and threaten court action if it does not comply. You can also complain to the Financial Ombudsman Service.
If the data is accurate but you think it is unfair – you were late with a payment for a good reason such as bereavement or illness – then you can ask for a notice of correction to be attached to your record. All firms that access it must read that notice.
Privacy and data protection
From 25 May 2018, businesses and organisations in Europe will have to take more care of our data and be more open about letting us see what they hold. A new EU law comes into force that day, which means any organisation that holds personal data will have to ask us for consent to collect it, and be clear about what they want it for and what they will do with it. They will need to let us have a copy of the data held about us in a usable electronic format and make no charge (currently it costs £10). In some cases we may be able to demand our data is destroyed.
If a firm loses our data, it must tell us within 72 hours. At the moment, there’s no duty to tell us and often firms do not, or delay for months. Any firm breaching the rules can be fined up to €20 million (£17.5m), or more for bigger firms. Find out more at the EU’s GDPR website.
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