If you apply for an instalment loan, mortgage or a credit card, this is likely to mean that a credit check will to at least to some extent be carried out upon you by the prospective lender who will utilise the services of a credit check bureaus, also known as ‘credit referencing agencies.’ There are a variety of reasons as to why these checks (some of which leave a credit footprint and other that do not) need to be carried out.
Who exactly are these agencies; what do they do and what does this mean for you? Here is our guide to how credit check bureaus work.
There are three main credit check bureaus in the UK that are the most commonly used. These are:
Credit check references such as those above provide information about you and your financial history to lenders every time you make an application for a loan or other type of credit. The notion behind credit check reference agencies, is that they make the process for companies to accept or decline your application a far more efficient process.
Without these agencies, companies would have to collect the information themselves about you in order to verify your eligibility. This would make the whole process of applying for credit much longer and slower. It could also heighten the risk of fraud if the agencies were not detached from the lenders as an impartial service provider, as lenders would be more tempted to say yes without all the information they need due to the slow speed of finding this out themselves.
After you have made an application for credit, one of these credit check bureaus will instantly check your personal information. Many people receive an almost instantaneous yes or no when it comes to their application, as many lenders have integrated the credit check into their systems so loans can be quickly approved or denied.
Credit checks are carried out on the following:
Depending on the result of your credit check, you may receive a better interest rate for the credit you have applied for, or if you credit score is quite low, you may have to pay a higher rate of interest for a mortgage or credit card.
Your information is provided by one of the three credit reference agencies and in this report, it will include a number of details about you and you financial past. This helps them decide whether you should be a recipient for a loan or credit.
Details provided as a result of a credit check will routinely include:
Finding out your credit score with one of the three credit check bureaus is well worth doing as it can help give you a greater understanding as to why you haven’t been accepted for a loan or credit application if this has occurred. It enables you to see if you have a good or bad credit record and based on this information, you can take steps to improve your credit score further.
A credit report can alert you to any old accounts you still have open that you may not have been aware of, and it can also alert you to any fraudulent actions on your account. If you do find yourself in one of these situations or find inaccurate information on your account it can be easily amended by contacting the credit check bureau, who can investigate the issue further.
Equifax, Callcredit and Experian all use different metrics to some extent when it comes to assessing credit scores and they will each also use different criteria. Hence, precisely what is checked and how depends on the agency you use or that which is used to check your finances by a lender.
Below, is the credit rating system of these companies and what equates to a ‘good’ credit score:
You can easily contact any of the main three credit check bureaus online; by phone, or by post to get access to your credit file. Some offer this for free but you will only receive a basic credit report in cases where this is the case. Alternatively, for as little as £2 for a Statutory Report you can acquire a bit more information and it is recommended that you do this yearly. If you are trying to actively improve your credit score, you may also be interested in a credit report subscription service, where you are regularly update about your credit file.