Ins & Outs of Credit Reports

We will reference the credit report to understand the habits of an individual. Within this credit report is a score which, along with other factors, lenders used to judge whether you would be a good risk for their company's credit. Basically, lenders want to make sure that potential borrowers do not have a history of bad debts, since lenders believe that this would affect their ability to pay off any future loans that they get.

Some of the companies that hold our factual information include Experian, CallCredit PLC and Equifax. Lenders hire credit reference agencies to check personal details, such as name and address, as well as items in your credit history, such as your past history with loans, any defaults on payments recorded against you and any legal actions in County Courts. Every time a new credit form is processed, an electronic reminder is left on your credit file. These footprints are used by credit agencies to compile a system of credit "scoring" which lending institutions, such as building societies and banks, look at while reviewing applications for loans.

It is not up to any of the credit reference agencies to deny credit; the lender makes this decision. There are numerous different reasons why a person can be denied credit. It is illegal, however, to deny credit to someone based upon their religious beliefs, gender, race, sexual orientation or address.

If you are turned down for credit, a lender must tell you why. Also, the Data Protection Act mandates that your lender must give you a review of your application if scoring was used as part of their decision-making process.

You can also ask for a copy of your credit report. Experian will usually send out reports within 7 days for £2.50 when ordered over the phone (0870 241 6212). The company will need your name, date of birth, current address, details of the last six years of previous addresses and will require you to have a debit or credit card in your own name.

For urgently needed credit reports, Equifax has a £11.50 per report online service and a £8.25 per report postal service.

Incorrect and/or outdated information on a credit report greatly affects the possibility of obtaining credit.

In this case you must correct the information as soon as possible:

* Keep a record of any and all steps you take to do so. Always get return receipts from the postal system and make duplicates of all documents and correspondence sent. Never send original documents.

* Before contacting the credit reference agency, contact the lender. The majority of lenders are large institutions with procedures to handle account disputes. If you can prove an error, the mistake should be corrected quickly.

* The creditor will have to own up to the issue with the credit reference agency if any of the information is found to be incorrect. Normally this occurs within 4 weeks.

* Always make certain to mail a letter as well as making a phone call. Write down every item that you dispute, and state why it is inaccurate. Make sure you include all information from your account number and the reason why you think information may be incorrect.

* Do not get in touch with the credit reference agency unless you cannot resolve the situation with the lender directly. The credit reference agency will need a printed version of your credit report from you to review the inaccuracy. If necessary, they will contact the original investigation company, notifying them of your dispute.

* The individual business will complete their own investigation and issue a report. Based on this report, the credit reference agency updates your file and notifies you of any and all changes.