A guide to understanding credit reference agencies
Credit agencies are everywhere. You don’t see them, but they certainly see you. Even if you’ve never actually been in touch with one of the many credit bureaus directly, it’s overwhelmingly likely that you’ve had some form of interaction with them in the past.
That’s because credit reference agencies, also referred to as credit bureaus, reporting agencies or simply just CRAs, are the organisations in charge of collecting your financial information. CRAs will be aware of any outstanding debts, finance agreements, loans, defaults, payments and even your address history.
Don’t worry – this information is strictly confidential and WILL NOT be shared with anyone who isn’t authorised to view it.
Every loan you’ve taken on, from bad credit loans to payday loans, will be displayed on your credit file, along with your payment history. This enables banks, lenders and brokers to analyse your credit history before deciding whether to lend money to you.
So, who are the main credit reference agencies in the UK?
Who are the main CRAs?
There are a few different CRAs in the UK. You’ll get different answers depending on who you ask, but it’s generally thought that the four main reference agencies that banks deal with are:
TransUnion (formerly CallCredit)
These four companies are the most commonly referenced as they are the most reputable. All of them provide the same (or at least a very similar) service, though they may rank your credit score in different ways.
Experian is one of the more well-known brands. They advertise their services on the TV, online and in partnership with many lenders. They also guarantee a free credit file checking service which can be incredibly beneficial for borrowers looking to improve their credit score.
If you use Experian to manage your credit, you’ll be given a score from 1 (very poor) to 999 (excellent). The higher your score, the more likely you are to be approved for mortgages, loans and any type of finance. You’re also likely to be offered better interest rates. This allows you to save more money over the duration of your credit agreement.
Each CRA will offer a similar ‘grading’ system. However, the highest available number and the way it’s calculated may be different. Some CRAs might score you with poor credit, whilst others may score you as excellent. It’s usually worth checking your credit file using more than one bureau.
How does it work?
Credit agencies work by collecting your information from banks, direct lenders and publicly available sources (such as the electoral roll).
When you take out any form of credit, you’re authorising the lender to pass the information on to a CRA. They will then add it to your credit history.
It might be important to note that CRAs do NOT make the decision of whether to approve you for credit or not. They basically just provide an outline for banks or other lenders to follow, providing them with necessary insight into your financial history.
Why are there so many?
Numerous people ask: “why is there an army of agencies?”
It can make things somewhat complicated. Rather than having one designated service, there is an abundance of CRAs who all have completely different scoring systems. They might even hold different pieces of information on you. Surely it makes sense to only have one service!
The reason that there are so many credit agencies is that each CRA provides a different credit service. Also, they might work alongside different credit lenders to provide you with a varied range of products and services.
Rather than use one bureau to reference every lender or credit product in the UK, we refer to four of them. This allows lenders to thoroughly and accurately see how you manage your finances. For instance, if they can see that you’ve historically made payments on time, maintaining credit utilisation at or below 30% and haven’t defaulted on any agreements, you’re much more likely to be improved.
It might seem like a bit of a roundabout way, but by utilising more than one CRA, banks can judge your credit history more fairly.
Don’t worry if you don’t have a perfect credit score; bad credit will improve over time, as long as you keep up to date with your payments.
If you’re worried about credit checks while applying for a loan, read up on our information on no credit check loans.