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Credit
Scoring and Credit Referencing in the UK
Credit
Scoring
What
is Credit Scoring?
Credit
scoring is used by most major financial organisations to help
them decide whether they can give the applicant credit. They
would check every applicant for a mortgage, current account,
personal loan or credit card.
It
is based on a system which predicts the future conduct of
an account based on the past performance of similar accounts.
It
works by taking all the relevant details of the application
and giving each piece of information a value or score. When
all the individual scores have been added together, the total
score gives the level of risk associated with the application.
The financial organisation will use the total score to help
them decide whether to accept the application.
Why
do financial organisations use credit scoring?
They
do this to make sure that each application for credit is assessed
in the same ways and allows credit to be given impartially
and fairly. The financial company should check systems and
procedures regularly to make sure that they are accurate and
reasonable. Responsible lenders is essential for the good
of both borrower and lender. The Government department that
is concerned with protecting consumers is The Office of Fair
Trading and the department considers that credit scoring is
an aid to responsible lending.
What
sort of information is scored?
Age,
employment, history, loans are taken into account.
What
is a credit reference agency?
Is
an organisation that stores and puts together financial and
publicly available information about almost every adult in
the UK. The agency does not decide whether credit should be
given - it simply provides the factual information that helps
the financial organisation decide whether to accept an application
or not.
What
information is provided by a credit reference agency?
This falls into two categories. Public information and credit
account information. The public information consists of the
Electoral Register from Local authorities which is used to
help identification, county court judgments from the Registry
Trust Ltd which is the official body that records county court
judgments "CCJs" and bankruptcies from the Official
London and Scottish Gazettes.
The
credit account information is held by credit reference agencies
on behalf of the lenders. Most of the UK' major credit granting
institutions store information about the credit agreements
they have with their customers with a credit reference agency
Many of these lenders have agreed to share this information
with each other. This lets them check, when someone applies
for credit, whether or not that person has repaid money to
other lenders in the past - they can check a person's credit
history.
Favourable information such as evidence of a loan that has
been regularly been paid on time should support an application.
Information showing loans that have not been paid on time
may adversely affect an application. If someone has had past
financial difficulties they are often more likely to have
problems in the future.
Can
one person be affected by the credit records of other members
of the same household?
Some
lenders may take into account information about people with
whom the applicant is financially associated with. For example
a joint account holder.
What
about other people who have lived at the same address in the
past?
Information
about anyone who used to live at that address is not provided
by a credit reference agency unless the applicant was associated
to them.
Can
an applicant see what information a credit reference agency
hold on them?
If
the applicant want to see the details, he/she can write to
them asking for a copy of their file. He/she will need to
give them details of all the addresses that the applicant
has lived at and any changes of name over the last six years,
together with date of birth, a cheque / postal order for £2.00.
Listed
below are details of 3 agencies:
Callcredit
Plc - Consumer Services Team, PO Box 491, Leeds LS3 TWZ
Equifax
Plc - PO Box 1140, Bradford, BD1 5US
Experian
Ltd - Consumer Help Services, PO Box 800, Nottingham NG80
7WF
What
if the information is not correct?
If
the details are not right, the agency's consumer help
service will help have them amended.
Credit
Search Referencing
What
is Credit Search referencing?
Many
UK Letting agents and Private Landlords use credit search
referencing on prospective tenants. Companies like Homelet
and Letsure offer this service
Depending
on the level of product used they might just provide a simple
credit score as outlined in the section above or more detailed
information contacting employers to find out if enough salary
is being earn to cover rental, previous landlord or agent
details to find out if rent has been paid previously.
Credit
Search Companies normally work on 30 X rent. e.g. rental of
£650 pcm X 30 = £19,500 (applicant must earn this amount per
annum – if not a guarantor might have to be used) * The credit
search company reserves the right to charge for a Guarantor’s
reference in addition and this will be charged out at the
normal applicant rate.
Some
companies work on a different formula 30 X rent X 12 e.g.
£650 X 30 X 12 + £23,400 (again applicant must
earn this amount per annum).
Several
of the credit search companies when they take up references
and the applicant has not been the electoral roll, or moved
several times will ask for "Proof of Residency"
copy of an utility bill (mobile phone bill etc) from the applicants
last known address.
With many
EU residents or non EU residents they will also ask for a
copy of an utility bill (mobile phone bill etc) from the applicants
last known address as “proof of residency”.
For
Further Information please see rest of this page
N.B.
This information should not be relied on for accuracy and
is presented here without the responsibility of jml Property
Service and the website it is being displayed at. ©jml property
Services 03-06
________________________________________________
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