Do you carry out credit checks?

Yes, as a responsible payday lender we carry out credit checks.

The concept of a credit report is much misunderstood. Whilst there have been concerted efforts by various companies including the Credit Reference Agencies (CRA), themselves to promote consumer access to their credit reports, many people still overestimate or underestimate the amount of data collected. In addition, it is unclear to many how their actions with potential credit providers affects their credit report, both in a good way and a bad way.

Who are the 3 UK CRA?

The 3 main CRA for both positive and negative credit information are:

  • Call Credit, Consumer Service Team, PO Box 491, Leeds, LS3 1WZ or call 0870 060 1414
  • Equifax, Credit File Centre, PO Box 3001, Bradford, BD1 5US or call 0870 010 0583
  • Experian, Consumer Help, PO Box 8000, Nottingham, NG80 7WF or call 0844 481 8000

How is data reported?

Data is typically reported between credit providers and the CRA on a monthly cycle. The information supplier follows a strict protocol to collect and map the data from their systems to a common format which is sent to the CRA. At the CRA this data is collated and sorted on a "per individual" basis and anomalies checked. In order to be able to perform this task, it is vital that the data supplier is not only collecting the information correctly but also mapping and transmitting the data accurately.

The actual mechanism of transfer can vary but most often it will be some form of secure file transfer from the credit provider's server to the servers of the CRA. Accuracy is of absolute importance and therefore the CRA employ the resources of a data integrity team whose job it is to check the incoming data, compare it to previous submissions and query anything that appears odd with the supplier. For example, a loan company report 50,000 new customers boarded in a month. The next month this is reported as 175,000. This may flag-up to the data integrity team at the CRA as being worthy of further investigation. If the lender can justify the large increase then no further action is required but it gives them an opportunity to re-evaluate their data and if there is an error, correct their mistake at the point of submission.

Why does all this matter? Well as we shall see, the cornerstone of responsible lending is making assessments and predictions about how an individual will behave in the future and what the impact of the credit will be on the individual themselves. If a credit provider cannot trust or rely on the CRA data then their decisions are going to be inaccurate. This can have serious implications not only for the lender's commercial return but also missing the aim of ensuring all actions are with the customer's interests first.

What data is reported?

Data that is reported boils down to 2 distinct types. The first type enables the CRA to identify the individual. So, for example name (including a middle name), address (previous address in some circumstances) and date of birth. These fields help with the collation of the right information for the right person. It is pretty obvious that you wouldn't want your data appended to another person's credit report and vice versa. That's why the integration process with a CRA is pretty onerous with a great deal of testing before data exchange can be set live. This goes for data that is transmitted from the CRA as well as the data that is reported by the credit provider.

Make sure you know your credit report

The second type of data relates to the payment history of the account. In other words, how you have conducted yourself in relation to your various debt obligations. This information is recorded using a series of codes to denote payments made on time and in full, payments that are late and payments that have been missed altogether. This enables other lenders to see an accurate snap-shot of your current financial affairs.

Who decides on what data is used?

All CRA activity is decided by a cross industry forum or steering group known as "SCOR". This group is made up of representatives from credit industry trade associations, credit industry bodies and CRA. It is responsible for the administration and development of the data sharing rules known as the Principles of Reciprocity. The group meets regularly to discuss issues such as data quality, breadth and depth of data collected and the usefulness and impact of credit checking as a whole.

What is a credit score?

A credit score is typically a 3-digit number that indicates your credit worthiness i.e. how likely you are to repay credit. It's based on your credit report, which as we have seen is a record of how you've conducted your financial affairs in the past. A credit score is a mathematical exercise to summarise your entire credit report and condense this into a "score". CRA will produce a standardised score for lenders and other credit providers to use. Bear in mind though that the lenders themselves may well calculate and use their own score. This is particularly true in payday lending, as the scores developed by the CRA are not that accurate for the entire population i.e. someone with a very high or very low score might not get the focus as someone with a score that tends to the average.

Can I see the information in my credit report?

Yes, you can request a statutory credit report for £2. See above for the contact information of the 3 main CRA.

What if the information is wrong how do I change it?

If you spot a mistake or inaccuracy, get in touch with the agency in question as soon as possible. They will be able to advise you on the best course of action to take.