Credit Reference Agencies

Introduction

Most people today have some form of credit, be it a mortgage, car loan or overdraft. Credit has become part of modern life. When you apply for credit, lenders will want to check whether you are an acceptable risk and they will require certain information. They do this by contacting firms called credit reference agencies

Objective		Activity		Resources		Outcome
To create an awareness of what information lenders require is order to establish credit risk. To learn that no-one has an automatic right to credit and to understand how Credit Reference Agencies work.		Brainstorming Teacher Led 'What sort of information do you think would be useful to a credit Company if they have to decide whether or not to lend you money?'				Knowledge and understanding of how the main Credit Reference Agencies work. Insight into risk assessment.
		Write the answers on a flip chart.		Flip chart and pen
		Give out a selection of blank application forms for credit (these could be obtained from various banks, building societies and retail outlets)		Blank application forms

• Many lenders use credit reference agencies to help them decide if you will be able to pay back any money you wish to borrow. Experian and Equifax are the main credit reference agencies in the UK.
• When you apply for credit, you will probably give the lender (the company you want credit from) permission to carry out a credit check. They do this so that they can:
  
  ascertain that you are who you say you are
  ascertain that you live where you say you live
  ensure that you are likely to keep up to the repayments
  
   
• They will also consider other information that you give them such as
  
  Employment
  Income
  Information on your credit file
  
   

• Lenders can refuse to provide credit and nobody has an automatic right to it. However, they cannot refuse to give you credit because of your race, sex, religion, sexuality or address.

• If you are refused credit, lenders do not have to give you a reason. However, most lenders have a code of practice that say they should give you the main reason if you ask. They should also tell you if the information on your credit report affected their decision.

  If the information on your credit report caused the lender to refuse credit, They should give you details of the credit reference agency they used. You can then get a copy of that report from the agency for a fee, usually £2.00.You can have the record corrected if it is incorrect or misleading. However, you can still be refused credit.

  Some lenders use automated credit scoring to help them decide if you will be able to pay back any money you want to borrow. This is where points are awarded according to your job, salary, marital status and area of residence. A lender should advise you if they refuse to give you credit because of an automated credit score.

• And finally, a lender may draw a 'no credit' ring around a certain area or Address, for example, a block of flats, a housing estate or a particular street with a bad reputation, and refuse credit solely on this basis. If you think you have been refused credit because you live in a 'no credit' district, you should report it to your local Trading Standards Department. West Yorkshire Trading Standards is 0113 2530241