Student Information, Advice & Guidance
money&consumeradvice
Credit Scoring & Identity Fraud
When you apply for a credit product, such as a mortgage, current account, personal loan
or credit card, lenders use a system called credit scoring as part of the assessment process.
A ‘credit score’ is a numerical expression based on a statistical analysis of a person’s credit
files, to represent the creditworthiness of that person. A credit score is primarily based on
credit report information typically sourced from credit reference agencies.
Why do lenders use credit reference agencies, and
what information do they have on my credit file?
Credit reference agencies hold information on most adults
in the UK. This helps lenders to assess the risk of lending to
particular people, and reduce the risk of fraud, by allowing
them to look at information held in individual credit files.
This information falls into three main categories:
• Public record information. The UK electoral roll
(used for checking names and addresses), county
court judgements (CCJs) and Scottish decrees
(awarded against people who have defaulted on debts),
and records of bankruptcies, individual voluntary
arrangements, debt relief orders and administration or
repossession orders.
• Credit account information. Lenders share information
about borrowers by registering it with credit reference
agencies. This can show whether people have kept
their payments up-to-date in the past. It also lets them
check whether people have loans outstanding with
other lenders and, if so, whether they have kept the
payments up to date.
• Search information. The file also records credit
checks carried out by lenders and a large number of
applications made over a short period of time. This
could be seen as an indication of over-commitment
(already juggling too much credit) or even fraud.
What happens if I fail the credit score?
If I fail the credit score does this mean no-one will lend
to me? No. Different lenders give different weight to
the various characteristics and some set a higher ‘pass’
score than others. So, just because one lender turns you
down, it doesn’t mean that other lenders will make the
same decision. You can always try somewhere else, but
remember that each application is likely to be recorded on
your credit reference file.
Also, failing a credit score might simply mean that the
lender feels you are over-committing yourself, taking into
account any existing debts you may have. If this is the case,
Updated 29/01/2013
it might be wise to reduce the amount you are seeking to
borrow, both to help you pass the credit score, and to make
your debts easier to manage.
Can I find out why I failed the credit score?
Lenders are unlikely to reveal the full details of the
information they use in their scoring system. This is
because they are worried that it may tempt people to give
false answers to questions, in an attempt to boost their
credit score. Also, the scoring systems are commercially
sensitive a lender does not want its competitors to know
how it chooses its customers.
Having said this, lenders that subscribe to the Credit
Scoring Guide or the Banking Code have agreed to give a
general indication of the reasons for failing a credit score, if
you ask them to do so and the name of any credit reference
agency used. They must also tell you that your application
will be scored. Lenders often look for stability and the
ability to repay your debts. If you own your own home, or
have lived in it for some time, or been in the same job for a
while, this will probably help your score. However if you
have several other credit cards or other loans, or have made
a lot of credit applications around the same time, they may
think you are over-stretching yourself financially.
Is there a credit blacklist, and is my name on it?
There is no such thing as a credit ‘blacklist’. The credit file
held on you by credit reference agencies contains certain
factual information that might improve or reduce your
chances of getting credit, but credit reference agencies
don’t tell or advise lenders who they should/shouldn’t lend
to. In other words, there’s no central list of people that no
lender will touch. Each lender will use the information
provided by credit reference agencies to help it make its
own lending decisions. Different lenders make different
decisions, even though they generally use the same sources.
How can I get incorrect information removed from
my credit file?
The Data Protection Act 1998 gives you the right to
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Information &Advice
Advice& Guidance
Student Information,
What is my credit rating?
When you apply for a current account, credit card,
personal loan, hire purchase (HP) agreement or
mortgage, or any other form of credit, it is likely that
the lender will ‘credit score’ your application. This will
help it decide whether to accept your application and,
where relevant, help set your maximum credit limit.
Credit scoring works by awarding ‘points’, depending
on your answers to the questions on the application
form. The questions are designed to help the lender
to assess your creditworthiness. In other words, it tries
to predict how big a risk it is taking by allowing you to
borrow up to a certain limit. If your total score reaches
a certain level, then you ‘pass’ the credit score. If you
don’t score enough points, the lender may:
• turn down your application or
• offer to lend you a smaller amount than you were
hoping for or
• charge you a higher rate of interest.
As well as credit scoring your application, the lender
will also carry out a credit reference check by using a
credit reference agency to look at your credit file.
correct information held about you which is inaccurate.
Ask the credit reference agency for advice about how to
go about removing or amending information you believe
to be incorrect.
Why are other people’s names included on my credit
file, and can I get them removed?
another person’s documents or details to buy things or
apply for credit in their name. Therefore it is essential
that you keep important documents (passport driving
license and birth certificate and also bank statements,
utility bills and letters from the council) safe.
• These can all be used as forms of ID and if you are
throwing any of these away then make sure you rip
them up into little pieces first. Better still, shred them.
It is a good idea to do this to any documents that have
your name and address on before you dispose of them.
• Watch out for emails or phone calls which ask you
to send or confirm your bank account details. This
is known as phishing. Commonly an email claims to
be from a bank or credit card company and may even
direct you to a website that looks legitimate. The
important thing to remember is that your bank would
never ask for your details in this way.
• You might also be asked to send your details so that
you can claim a lottery prize, or your share of an
unclaimed fortune. The advice is the same in all cases;
never supply your bank details if they are requested by
email or by a phone call.
Finally, always check your bank and credit card statements
carefully to see whether there are any transactions you
don’t recognise. You need to let your bank or lender know
straight away if there are. The Home Office has produced
a useful website which can help you to protect yourself,
advises what to do if you are the victim of identity theft
and suggests where to get further help. http://www.
identitytheft.org.uk/default.asp
When you apply for credit and lenders check your credit
file, they can only see information about other people you
are financially linked to, such as people you share a joint
bank account or mortgage with but it won’t include any
of their financial details. If your credit file shows you are
financially linked to someone when you are not, you can
ask the credit reference agency to amend the file so that the
link between you is broken.
Need further advice or information?
How do I protect my money?
Independent Financial Advice
www.moneyadviceservice.org.uk
Whether we’re talking about the cash that you carry in
your pocket or the money that’s in your bank account, the
basic point is the same. You wouldn’t leave your wallet or
purse lying around in public for anyone to empty, and you
should treat your personal details, bank details and cards in
exactly the same way.
• always keep your chequebook, bank cards and credit
cards safe so that they cannot be used to take money
from your account or use credit in your name.
• don’t make it easy for someone to steal your identity
- it is becoming increasingly common as criminals use
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The Compass and Student Advice
Student letters and appointments for face-to-face
advice and guidance www.kcl.ac.uk/advice
Student Funding Office King’s bursaries and
hardship funds www.kcl.ac.uk/funding
Credit Reference Agency’s
www.experian.co.uk www.equifax.co.uk
Identity theft: Don’t become a victim
www.met.police.uk/fraudalert
Money Saving Websites
www.creditaction.org.uk
www.vouchercodes.co.uk
www.moneysavingexpert.com