Credit Reference Agencies

You cannot deny the importance of credit in everything that we do today. it will affect everything from your ability to get a job to getting a loan for your new house. Therefore maintaining a good credit record is essential. Your credit history will illustrate how well your bills are paid and how well your past credits have been handled. It will also include your credit status today and how dexterously you are handling it.

A Credit Reference Agency is an agency which collects information from various sources and provides lenders with credit details of individual consumers for a variety of uses. This helps lenders determine the credit worthiness, loan pay back capacity and interest rates applicable for that consumer. Not all are lent money on the same interest rate since interest rates depend on a risk based pricing which is a type of discrimination based on the different credit ratings of each individual.

Credit Reference Agencies gather and compile information and credit data on consumers and business agencies from sources like financial data furnishers who in their turn get the information from the consumer or business itself. Data furnishers are businesses, agencies or any such which the consumer had a relation with. This entire data is then included in the bureau’s repository files.

This data is then made available to the lenders for the assessment of eligibility of the consumer for a loan. Credit assessment and credit scoring are two things that are also done from this data by the bureau members. It is necessary for the consumers to review their credit reports every one year since this will help them have easy access to credit than if their credit reports are a few years older. In this way accuracy of the reports are also ensured by both the lenders as well as the borrowers.

Most banks and lending financers subscribe to any of these credit reference agencies to ensure that they are lending money to the right person for the right reason and not to someone who will run away with their money. Financers include companies which issue credit cards and store cards mainly. The companies who subscribe to such reference agencies provide relevant data so that they can maintain a common data pool.

The credit reference agencies are bound by a Data Protection Act which requires that all data submitted must be accurate and up-to-date, relevant and not such which will provide for embarrassment. Individuals are also allowed to view their data since access to personal data is legal.

The workings of the Credit reference agencies are securely governed by the Consumer Credit Act of 1974 laid down in the law book of UK.