Credit reference agencies store personal data, which is compiled to issue and maintain credit reports. These reports are prepared for anyone with a credit history or on the electoral roll. These agencies gather data from sources, such as financial institutions, census data, public records, electoral rolls, consumer surveys and the Driver and Vehicle Licensing Agency. Credit reference agencies are not governmental agencies. However, they are bound by legal restrictions.
The three major credit reference agencies operating in the UK are Equifax, Experian and Callcredit (which works in association with its American partner, TransUnion). Most organizations granting credit or issuing products on credit (such as cards) subscribe to one of these credit reference agencies. This ensures the quality of lending.
Credit Reference Agencies and Legislations
The 1974 Consumer Credit Act governs the activities of credit reference agencies. Apart from this, these agencies are regulated as per the 1998 Data Protection Act. This requires these bureaus to provide accurate, updated and relevant data on identifiable individuals. Credit reference agencies, under section 7 of the Data Protection Act, issue statutory credit report to safeguard the interest of lenders and protect them from losses.
Every individual has the right to access the data held on them by agencies. If the person feels that an agency has given an incorrect impression of his or her credit standing, the agency should be contacted with evidence backing the case.
Role of Credit Reference Agencies
Lending entities need to carry out a process known as credit reference, to determine the repayment abilities of a person before granting him a loan. By this, they confirm the financial stability of borrowers. Credit reference services can be obtained by enlisting with a credit reference agency. These agencies take into account the existing debts and sources of the income of people.
When one applies for bank credit reference or trade credit reference, he does so through a credit reference form. Credit reference agencies develop a comprehensive form to make sure that every detail of the applicant’s credit history has been taken into account. With more information, a sounder credit decision can be taken.