Who are the three UK credit reference agencies and what do you need to know about them?

Is your credit score in need of a little TLC or are you just wondering how they work? I’ll talk you through the three major credit reporting agencies in the United Kingdom, Experian, Equifax, and TransUnion. You will find out what they do and how it impacts you.

The thought of your personal data being collected can cause a little worry, one of these worries may be the thought of these credit reference agencies and what they hold about you, be rest assured though, they do have an important role to play in our lives.

Without them, each time you applied for a loan, credit card, mortgage or any other form of credit, the lender would need to conduct its own checks to obtain how worthy you are to lend to. This would not only slow down the process, but the data accuracy may not be thorough or even correct. This could lead to the wrong decision in either approving or declining the application. It would also help fraudsters with identity theft, a growing concern currently in the UK.

Their Role:

Credit reference agencies collect and compare all the information held about your ability to manage credit. The data held shows how well you manage your personal finances in the past as well as the financial obligations you have at present. Based on this information credit providers can decide how great a risk you are if they were to lend you money.

Credit reference agencies are independent organisations and don’t ‘own’ your information. Instead, they hold the data supplied by lenders and from public records then share it with financial establishments when you make a credit application.

How often are the reports updated?

Four to Six weeks are the typical timescales for credit reference agencies to update their data supplied by lenders and other companies who you have a financial connection with, these include, utility companies, credit card providers, mobile phone companies and some major retailers.

The 1998 data protection act bounds the terms in how your information is held. Meaning that you must give your consent for someone to gain access to the information about you.

Crime and Debt Recovery:

Apart from checking information for any variations and errors, credit reference agencies have a part to play in confirming someone’s name and address to prevent identity theft and fraud. They are also used to combat money laundering and help in the recovery of debts. Their data is consulted by government bodies to check entitlement to certain benefits and to recover unpaid taxes and other such money owed.

How similar is the information held by credit reference agencies?

Lenders should share their information with all three credit reference agencies. However, this doesn’t always happen. You might find that the data held on you by the three main agencies is slightly different. This can have an impact on credit applications as it is possible that you have a better score with one agency compared to another. This can have an impact on your credit application.

Lenders don’t always use the same agencies either when carrying out a check of your creditworthiness. Some financial institutions use one agency whilst others use two or might even consult all three. This is worth knowing before you apply for new credit.

What is the best credit score to have?

Another difficulty with the three credit reference agencies in the UK is that there’s no such thing as a universal credit score. Each agency has their own way of ‘scoring’ individuals and what weighting they give to the various pieces of information.

• Experian uses a scoring system of 0-999
• Equifax have a scale that goes from 0-700
• TransUnion scores range from 0-710

This means that you should pay less attention to the number itself and more to where it falls within the range. For example, a score of 560 is considered ‘poor’ for Experian while it falls in the ‘excellent’ band for Equifax.

It’s recommended to check your credit profile from time to time because it’s quite common to find errors that can pull down your credit rating.

https://www.transunionstatreport.co.uk/ (credit Karma)

https://www.econsumer.equifax.co.uk/consumer/uk/order.ehtml?prod_cd=UKFCSCORE

https://www.experian.co.uk/

What power do they have?

Credit reference agencies have no personal motivation. They present the information as it’s been supplied to them without any comments (positive or negative). They never recommend whether a credit provider should lend you money and nor do they possess a blacklist.

The decision about whether to approve your application is made by the lender alone. Of course, your credit report will be one of the factors they consider but it won’t be their sole criteria. They’ll also consider your application, your affordability, and the personal details it contains. In fact, a recent analysis of over 15 million applications found that most applications are declined based on technicalities and not necessarily credit scores.

Conclusions about the UK’s three main credit reference agencies

Although the idea of credit reference agencies might conjure up pictures of ‘big brother’ watching everything we do, they play a crucial role in the financial industry. As long as they ensure that the information held about us is accurate and up to date, they can be used to speed up credit applications and promote responsible lending.