What are credit reference agencies?

Applying for a mortgage? Credit reference agencies calculate your credit score, which helps lenders decide whether you’re a safe bet for a loan. But how do they do it? What criteria do they use? Here’s what you need to know.

Applying for a mortgage? Credit reference agencies calculate your credit score, which helps lenders decide whether you’re a safe bet for a loan. But how do they do it? What criteria do they use? Here’s what you need to know.

Written by
Alex Hasty
11 OCTOBER 2021
6 min read
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What’s a credit reference agency? 

Credit reference agencies (CRAs) are independent organisations that hold identity and finance-related information on you. They use this to compile a statement, called a credit report, and on the basis of this, give you a credit score. When a lender is deciding whether to approve your loan or credit application, they’ll approach a credit reference agency. 

When calculating your credit score, credit agencies will consider your credit history – what credit cards, loans or other credit agreements you’ve taken out and whether you’ve paid them back in full and on time. They’ll also look at how much outstanding credit you have and check if there are any black marks against your name, like bankruptcies or county court judgements (CCJs). 

But CRAs don’t make decisions on whether to lend to you – that’s up to the lender.

How do credit reference agencies work? 

Credit reference agencies gather all sorts of personal information about you. This comes from banks, credit card providers, other lenders and sources of information including public records like the electoral register. Any CCJs or bankruptcies in your name will also show up on public records. 

Banks, credit card providers, other lenders, utility providers and a range of other organisations ‘subscribe’ to CRAs and submit information to them. When they need to make a decision on whether to lend to you, they can use that pool of data to find out what debts you have and how diligent you’ve been paying them back.

Lenders and landlords can only pass on information about you if you’ve given them permission to do so. However, this is likely to be part of any credit agreement you have with them.

Where do credit scores come from? 

Credit scores are calculated by CRAs, based on the information in your credit report. The CRAs each have different methods of calculating credit scores.

Why is my credit score different on different sites? 

There are three main credit reference agencies in the UK – Experian, TransUnion and Equifax – and you may find you get a different score from each. This is because they each calculate your score in different ways. 

You’ll also find that each credit agency has a different score range. That means a top score with one company might be a low score with another. But, to make things easier, you should also find that each agency gives you a rating alongside your score, such as ‘poor’ or ‘excellent’, so at least you know where you stand.

What information do credit reference agencies hold? 

CRAs can hold a variety of information on you. This can include:

  • The addresses you’ve lived at for the past six years
  • Credit agreements you’ve signed up to
  • Payments on your credit agreements – including late and missed payments
  • How much you’ve used of the credit available to you. This is known as credit utilisation
  • Details of anyone you’re financially associated with – someone you have a joint mortgage with, for example 

You can see the information held on you when you check your credit report.

Do credit reference agencies have the right to know all this information about me? 

Yes, they do. Credit reporting agencies don’t need your consent to keep hold of your personal data. They just need to tell you that they’re going to do it. Again, you’ll usually find this info in the small print of any loans or financial agreements you take out.

How can I check my credit report? 

Most credit reference agencies will let you check your credit report and score on their websites for free, but check the small print as there could be a charge after the first month. Experian, Equifax, and TransUnion will all let you access your credit report from their websites. 

We have eligibility checkers where you can find out how likely you are to qualify for a credit card or loan without harming your credit score. 

When you apply for credit, potential lenders will carry out a hard search on your credit report. This leaves a mark that lenders can see. If too many hard searches are carried out in a short period of time, it can damage your record as it may look as if you’re desperate for money. But soft searches, which are what our eligibility checkers use, aren’t visible to lenders so won’t affect your score.

Why should I check my credit report? 

It’s a good idea to check your credit report before you apply for a mortgage, credit card or other loan. This will enable you to see if there are any mistakes on your file that need to be put right. Even if you’re not applying for credit, it can be useful to check your credit report from time to time to make sure you haven’t been a victim of fraud and that the information held on you is accurate.

What can lenders see on my credit report? 

What lenders can see depends on what type of search they do. In a soft search, they may just see information that confirms your identity or that the details you’ve provided them with are correct. In a hard search, they’ll see more information. Lenders won’t see soft searches on your report, although you can see these.

Who decides whether I get approved for credit? 

Ultimately, it’s the lender who decides whether or not you’re approved for credit. Your credit report and credit score will help them do this, but they’ll also take into account other details you’ve given them.

Frequently asked questions

Why is my credit score important?

Your credit score is an indicator of how creditworthy you are and the likelihood of you being accepted for the best deals on loans, mortgages and credit cards. Similarly, if you’re trying to get a mobile phone or switch energy company, you’ll find the first thing they’ll do is run a credit check on you.

At certain times in your life – when you’re trying to buy a home, for instance – your credit information will be hugely important. But remember that credit scores can change, so if yours isn’t where you want it to be, you can take steps to improve it.

What doesn’t my credit report include?

Your credit report doesn’t include every detail of your financial life. For example, it won’t include your salary. Nor will it include details of any criminal record, medical records, savings, student loans or council-tax arrears.

How can I improve my credit score?

There’s a few ways you can improve your credit score. Here are just some of them: 

  • Make sure you’re on the electoral register
  • Never miss any repayments
  • Build up a credit history by making sure you have some utility bills in your name
  • If you have a bad or no credit history, consider a credit builder card. Making your payments on time could help you build your credit score.

Will checking my credit score affect my credit rating?

No, checking your credit score or looking at your credit report will never affect your credit rating.