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FINANCE

Credit Reference

How to keep ahead of the game

Money may be available from banks and building societies, but it's not always easy to get your hands on it. Why?

Many things influence whether you are deemed credit worthy and the judgments made by those who make the loans are not always as correct as they should be. People today tend to think that a computer cannot be wrong, but it can, for it is only as good as the information that is fed into it. The saying goes "garbage in garbage out" and it is true of many so called credit reference agencies. Their employees tend to believe all they are told and see on the computer screen. The people that this information is passed on to from the managing director down believe every word. Not too many people these days exercise their brains. To be fair, some of the information is correct. It cannot ever be completely correct, for things are constantly changing.

So what do they look for ? Where you live is high on the list. The Register of Electors, or voters roll as some people incorrectly call it, is where you are assessed first, so make sure that you are on it. At present to qualify to be on the register you must have registered on the roll by the 10th of October each year. The register is then published on the 16th of February of the following year. You can see from this that credit reference agencies have a year to update the information that they supply for a fee to interested parties and it can be up to twelve months out of date. This however could be about to change, for a system of continuous updating, with a rolling register administered by district polling officers is being looked at by an enquiry panel and, if thought suitable, introduced by parliament. Whether the credit reference agencies will be able to keep up with this remains to be seen, but if past results are taken into account they will not. Other factors that cause inaccuracies are researchers at the credit reference agencies missing people and areas off polling districts.

There are not set rules people can follow to ensure that they qualify for credit because each lender sets their own credit scoring system. Therefore a rejection from one lender could be an acceptance from another. Flat mates and family members can influence whether or not people are granted a personal loan or credit card. Where people live (post codes), what job they do, what level of income and how often they move, change jobs or apply for credit can also influence results. Other factors that may be taken into consideration are: Do you own your own house? Do you repay loans on time? Are you over 21? How long have you been working for your current employer? How many times have you changed your job? How long have you been living at your current address? Whether you are married or single. They will also check your credit history with credit reference agencies.

It can be seen that credit is not a right, but a privilege, and up to the whims and fancies of individual lenders. Advertised claims by lenders wanting customers does not mean that you automatically get what is being offered. If a credit card has been oversubscribed they may turn applications down because of this and not because your credit file is bad. Even banks become short of cash and have difficulty in maintaining a cash flow.

If you keep getting turned down for credit it is time to take a look at what information credit reference agencies are working from. The two main agencies are Experian and Equifax and they will send you a copy of your file for a fee of £2, although Equifax are continuing to charge £1 until November the 1st, 1998. Callcredit give the same service. The statutory fee was doubled by the Office of Fair Trading (OFT) in May, 1998. The agency must reply within 28 days. If something is wrong you can apply for your file to be updated or changed. Do not leave things to chance. Do something at once. Do not wait until you want credit, run a check with both agencies now.

It may be that you have county court judgments (CCJs) and Scottish Decrees against your name; whether your home has ever been repossessed; if you have been made bankrupt or in Individual Voluntary Arrangements and whether you are registered to vote.

The main lenders share information of each others' customers' credit arrangements. So the lender will be able to find out if you have kept up with your repayments in the past and how many times you have applied for credit. Lenders will treat with suspicion borrowers who have made several applications over a short period of time because it could indicate over commitment or fraud. Your credit file could contain details of other people who have lived at the same address, but this can be removed if it has been used unfairly. Information concerning family members can also be contained on your file so you must apply to the agency to have this information removed from your file in order to dissociate yourself from the other person.

Do not use organisations that claim to clear up your bad credit record or repair your credit for a fee and advertise in magazines and tabloid newspapers. The most common claim is that they will clear up your county court judgments (CCJs) or Scottish Decrees and defaults from individual's files. Most of these services can be obtained free. If you believe that you have been given a CCJ unfairly you can apply to the county court for it to be removed.

Your rights are currently enforced by the Office of Fair Trading (OFT), but changes in the law later this year will mean that responsibility will pass to the data protection commissioner. Meanwhile a free booklet "No Credit" can be obtained by writing to the OFT, PO Box 366, Hayes, UB3 1XB or by telephoning 0870 606 0321.

The Citizens Advice Bureau (CAB) will give free advice to people having problems with their credit file at a credit reference agency such as Equifax or Experian. If you think special circumstances led to the CCJ against you it is worth having a note of this on your credit file. A CCJ does not automatically mean that you will be turned down for credit as the reasons that brought it about will be looked at. Just because you got in difficulties as a student does not mean that you will never get credit again, for students become the business people of the future.

To correct an inaccurate file you should take the following action: If the information is just wrong it should be removed from your file; in other cases you are allowed to provide a 200 word statement, called a "Note of Correction", to be added to your file. This gives you the opportunity to explain such things as CCJs issued against you when you were unemployed, or still in dispute with a company about goods that you bought from them. Any mitigating circumstances for debts caused by redundancy or divorce should be filed.

If you are refused credit it is worth making an appeal to the lender, as up to 70% of appeals are successful.

It is worth reading magazines such as Your Money Direct magazine if you are about to apply for credit to see what the best deals are at that time.

Tips to follow:
1. Restrict the number of applications you make for credit.
2. Ensure that you are listed on the electoral register.
3. Obtain a copy of your credit file from a credit reference agency and check that it is up to date. Have mistakes put right.
4. Avoid county court judgments (CCJs) or Scottish Decrees by contacting your lender to arrange amicable repayments.
5. Try to pay off CCJs or Scottish Decrees within a month (30 days) so that it does not show on your credit file.
6. Attach a 200 word statement "Notice of Correction" to your credit file explaining the reasons why you are unable to clear your CCJ or Scottish Decrees within one month.
6. Avoid credit repair agencies that promise to remove CCJs or Scottish Decrees from your credit file for a fee or otherwise.
7. When applying for credit only ask for what you can easily repay. Never over stretch yourself.
8. If you think that you have been unfairly turned down when applying for credit it is worth applying to the lender to reconsider your application.

The Citizens Advice Bureau (CAB) can be contacted at their local branch whose address and telephone number can be found in the local telephone directory. County court offices have their address and telephone number in the local telephone directory. The addresses and telephone numbers of the three credit reference agencies above are:

Experian, Consumer Help Service, PO Box 8000, Nottingham, NG1 5GX. Telephone: 0115 976 8747

Equifax, Department IE, PO Box 3001, Glasgow, G81 2DT. Telephone: 0990 783783

Callcredit, One Park Lane, Leeds, West Yorkshire, LS3 1EP. Telephone: 0 113 242 4747

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