When you apply for finance, such as a credit card, loan, or mortgage, the lender will run a credit check – or credit search – with a credit reference agency.
There are 3 main credit reference agencies in the UK:
Each agency uses a slightly different method and data to create a credit score – a 3-digit number that indicates how reliable you are at borrowing and repaying money.
Your credit score is calculated using a points system, based on what’s in your credit report.
Lenders and other companies use this information, among other factors, to decide whether to accept your application. They may also use it to decide how much they’re willing to lend you through a loan or mortgage, or what your credit limit on a credit card should be.
The data each CRA holds may differ, but will include information like:
To keep the credit scoring system secure, the exact details each credit agency holds are not made public. The information they collect comes from publicly available sources and privately held data from companies who agree to share it.
The 3 main CRAs all use slightly different scoring systems to work out your credit score. But the principles behind them are the same.
Different lenders may report to different CRAs when you apply for credit.
Improving your credit score before you apply can give you a better chance of getting approved. If you have a poor credit score, you may find your application isn’t accepted, or you could be offered a higher interest rate.
Credit reference agencies are regulated by the Financial Conduct Authority (FCA). This is because they are handling data concerned with credit. They are also covered by the Consumer Credit Act of 1974.
