Your home may be repossessed if you do not keep up repayments on your mortgage.
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Credit Searches & Credit Reporting Agencies
Credit Searches & Credit Reporting Agencies
When you submit a mortgage application to a lender, as part of their underwriting process, a lender will usually obtain information about you from a consumer credit reporting agency about your current personal financial circumstances. This is called a credit search.Credit reporting agencies collect personal financial data on individuals, from financial institutions they have a relationship with. This helps the lender assess your credit worthiness, which is your risk to them as an individual. An individual's credit worthiness will take into account many factors such as age, occupation, income and credit history. It is important to note that every lender has a different method of assessing credit worthiness, although they all essentially look at the same information when undertaking a credit search. Lenders who subscribe to credit reporting agencies for information must also give the credit reporting agencies information they hold on individuals. This reciprocal relationship helps to maintain a common pool of information on individuals.
Your credit worthiness will often affect the interest rate that a lender is willing to offer you. This risk based pricing approach is becoming more common in today's highly complex mortgage market. Lenders use the information revealed by the credit search to interpret your risk to them. The information held by credit reporting agencies include:
• Whether you are on the voters roll at your current address or previous address. This will give lenders more comfort that you actually exist.
• Previous credit history and conduct; this will show the lender what your track record is of maintaining credit. Information on credit account conduct remains on your credit file for 6 years after the credit account has been ended.
• Previous credit searches, these remains on your credit file for 12 months.
• County Court Judgments (CCJ's) and defaults remain on your credit file for 6 years after they have been satisfied.
As lenders use the information provided by credit reporting agencies to assess your risk to them, it is vitally important that this information is correct. Financial institutions and credit reporting agencies are bound by the Data Protection Act, which requires that data relating to identifiable individuals must be accurate, relevant, held for a proper purpose and not out-of-date.
We would recommend that you obtain your credit report at least once a year to check its accuracy. It is a very easy process to obtain your credit file and costs only £2.00. In fact you have a legal right to access data held by credit reporting agencies and to have corrected any inaccurate information.
Within the UK most lenders subscribe to one of two credit reporting agencies; Experian and Equifax. Both offer easy ways to help you manage correct and view the information they hold on you. If you find incorrect or personally damaging information held on your credit file, that breaches the Data Protection Act, you may have a case to refer the matter to the Information Commissioner. The Information Commissioner is the UK regulator on Data Protection issues for more information on how they may be able to assist you, please visit their website.
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- National Security Inspectorate
- Glossary of terms
- Citizens Advice Bureau
- Information Commissioner
- RICS website
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