Good morning / 19.11.08
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Mark Ward is Head of Consumer Services at Callcredit. In this section Mark answers common personal finance questions.
Before writing in with your question, please check that Mark hasn't already answered it in a previous query.
Mark will endeavour to answer as many credit questions and give as much credit advice as he can. Please keep checking back to see if your credit question has been answered.
Last week on-line, I received credit reports from all three credit reference agencies. On two of the reports, it showed that I have a low credit score, but the other one gave me a three-star rating which I would have thought was pretty good. Why do credit reference agencies have different information? Are there certain credit card and loan companies that use different agencies, because I'm still being refused credit?
Sarah, Rochester
Like most things in life, Sarah, different organisations will have different views about your credit rating. We calculate and supply your credit rating based on the information we hold about you, in comparison with all the information we hold on other individuals.
Lenders, however, score the information provided to them by credit reference agencies, along with other non-credit data and assess the 'fit' of you as a prospective customer to their preferred customer profile. They will also assess your credit risk, i.e. how likely you are to repay the credit for which you have applied. Even if you have what seems a great credit file, some lenders may decide you do not meet their ideal customer requirements for other reasons.
When you apply for credit, a lender will take into account three major factors - the information you supply at point of application, your existing relationship with them, and the personal information registered about you at one or more of the credit reference agencies. If you are still struggling to obtain credit, why not visit www.mycreditzoo.com? Just enter your personal details and they'll match you to a lender that may be right for you.
It's also worth remembering that credit reference agencies do, as you have suggested, hold slightly different information sometimes. Your public data, such as how long you've been on the Electoral Roll and whether or not you have County Court Judgments should usually be the same no matter which agency you approach. However, your account information can vary, depending on which agency you use. The majority of major financial organisations in this country supply account data to all three UK agencies, whereas a smaller number may only supply to one or two.
I recently hit financial difficulties, which led to several of my credit cards falling into default. I kept the banks informed of my difficulties and eventually managed to repay all my debt. The defaults are all now showing as satisfied but I am still finding difficulty in obtaining credit for a new washing machine. Is there anything I can do?
C.H., Dingwall
It is often difficult to get back onto the credit ladder when you have hit financial difficulties in the past. Potential lenders will look at the payment history of other accounts you hold, and some are understandably reluctant to offer credit facilities where they can see a poor payment record. However, the fact that your defaulted accounts have now been paid off is definitely in your favour, and it is possible that certain lenders may be willing to offer you credit facilities. It is always worth getting a copy of your credit file whenever you are struggling with credit applications - you will get to see the same information that lenders do, and it may be that some information could be wrong or out of date. Credit reference agencies can help you amend information that is incorrect free of charge, so never pay someone for this service. Alternatively, subscribe to an online credit monitoring service like Callcredit check.com, where you can monitor your credit file 24 hours a day, 365 days a year. Consider adding a Notice of Correction to your credit file to explain why you fell into difficulties - some lenders can be more sympathetic when they have an insight into the background of your payment difficulties. A notice of up to 200 words can be placed on your credit file free of charge.
Recently I moved home, and since arriving in my new home I have had lots of red letters addressed to the previous occupant, which is worrying me greatly. Will I be tarnished with the bad credit rating of the person I bought my home from and is my address 'blacklisted'?
R.C., Aberdeen
In short, the answer to both questions is no. It is a common misconception that an address can be 'blacklisted'. Credit reference agencies hold information attached to individuals at the addresses where they currently live, or have previously occupied. For example, you may still have information attached to you concerning the time you occupied your previous address, such as Electoral Roll details. However, this information remains attached to your personal credit file, rather than to your previous address. This is why potential lenders will ask you for details of your previous address during a credit application - they need to see the conduct of any accounts held by you at that previous address, but this information relating to you will not attach itself to the person who bought your home. Nor will any information about the previous occupant of your home appear on your credit file. As for the mail you are now receiving, do not open any of the letters addressed to the previous occupant of your home - simply mark them as 'Not Known At This Address' and return them to the address stated on the back of the envelope. This will make the organisation in question aware that their customer no longer lives at your address, and this correspondence should then cease.
I recently moved home, and have started to purchase lots of goods on Hire Purchase. Every time I go to a retail store to apply for credit, they tell me they will have to check my details with a credit reference agency. Why is this necessary? All the information they need is taken when I apply, surely?
D.C., Inverness
Lenders need to verify the identity of their applicants and establish some basic facts about their applicant's finances to enable them to lend responsibly. They also need to fulfill their legal responsibilities and comply with the Money Laundering regulations. Credit reference agencies enable them to do this. Lenders will check their applicant's credit history to establish if previous credit agreements have been repaid on time and to check their current financial commitments. This assists them in establishing whether the applicant has the ability to repay the credit they are applying for without causing over commitment. They also check the files of a credit reference agency to help them identify fraudulent applications. Although I can understand your concerns, the fact that a lender uses a credit reference agency speeds up the lending process rather than hampering your ability to obtain credit.
For the past year, I have really been struggling to keep up to date with payments on my credit cards. One of my friends has suggested that I go to a 'credit repair' company for help. What can they do to assist me?
R.M., Aviemore
To be honest, my advice would be to steer clear of such organisations. Credit repair companies claim that they can help you remove derogatory information such as County Court Judgments and defaults from your credit file. Credit reference agencies will only amend or delete information from their files when instructed to do so by the institution who provided it. For instance, CCJs cannot be satisfied without a certificate of satisfaction issued by the County Court. Before paying a credit repair company any money, please seek advice from your local Citizen's Advice Bureau.
