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What is a Credit Reference Agency?

11 April 2008

Credit Reference Agencies collect information about the way people handle their finances. They use this to compile your credit report, which you can think of as your financial ‘track record’.

There are three Credit Reference Agencies: Experian, Equifax and Callcredit.

Credit Reference Agencies are not government agencies. They’re companies, and they sell your credit report to businesses who need to know more about you and your finances. It could be a bank you’ve asked for a loan, a building society you’ve asked for a mortgage – or a mobile phone service provider you want to give you a contract.

Why do Credit Reference Agencies provide credit reports?
Every company needs to protect itself. They won’t hand out loans and contracts to potential customers unless they’re confident they’ll pay their bills and basically live up to the terms of the agreement. Different companies tend to have different criteria for approving or rejecting applications, but a credit report can make a real contribution to their decision-making process – which is why they feel it’s worth paying the Credit Reference Agencies. A credit report can help them make up their minds:

1. whether they should do business with that person, and
2. how much they should charge them if they do.

So if someone’s always paid every bill on time and doesn’t owe more than they can afford, they can be confident they’ll have a good credit rating, which means they’re likely to get approved at a pretty good price. Someone with a worse credit rating might also be approved, but have to pay more. And someone who always pays bills late and has been taken to court by multiple creditors might find it much harder to get approved – they may have to go to a specialist who helps people in this kind of situation. However, they can improve their credit rating. If you’d like to know more about this, check out How to: get approved for credit and see the ‘Improving your chances’ section.

Finally, everyone has the right to see their credit report – not just to find out how good their credit rating is, but to see if there are any errors on it. If there are, they have the right to get them corrected. Credit Reference Agencies will charge to provide your report: you can do it online, but doing it by post will cost you less (should be £2). Since each Credit Reference Agency collects different information about you, it may be worth checking all three.

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