Mortgage Credit Reference Agencies

There are three Credit Reference Agencies (CRAs) in the UK; these are Experian, Equifax and Call Credit.  These companies hold extensive data on your financial profile and history.  A CRA search against an individual will leave a “footprint” or record on the credit file, which could adversely affect that person’s application for credit in the future, particularly with prime leaders, who may regard the search as an application for credit that has been declined.

Those who have consent to undertake a search need to be careful not to carry out two or more searches through keying errors.

Many specialist lenders used mortgage packagers to originate applications via mortgage intermediaries. These acted as agents of the lender.  Your CRA information should not be passed to a third party for use in selecting a mortgage. Mortgage Packagers often used the CRA data to advise the mortgage intermediary on products available from lenders based upon the results of the CRA search. They were arguably giving advice to the mortgage intermediary on the suitability of products without knowing the borrowers full circumstances. This is contrary to the Mortgage Code of Business.

Automated loan approval using CRA data

Some lenders had ‘rules based’ software which used the CRA data and other financial assumptions on your profile; it was also based on general, historic credit data. GMAC, a top 10 specialist lender for example, used POSD, point of sale decision. This was accessed by brokers and packagers, who would input an applicant’s data into the POSD software. The result was a guaranteed mortgage underwriting decision and detailed products available to applicants.

Lenders Credit Reference Search Policy

All employees are personally responsible for maintaining customer confidentiality and must not disclose any information about an applicant or a customer to anyone who does not work for the lender or to anyone who does work for the lender but does not need the information for the purpose of carrying out his/her job responsibilities, unless they have the customer’s specific consent to do so.

Why Searches Are Performed

Credit reference agencies; provide information about individuals, which can be accessed via a search on name and address. These searches are performed to access the credit payment performance of individuals and businesses. They are important to help to assess the individual or business’ ‘intent to repay’ a new loan facility that they have applied for.

When a Search can be carried out?

A credit search against an individual may be carried out only with that person’s express consent in writing to a) the search, and to b) the specific purpose for which the search is being carried out. Failure to comply with these two criteria breaches the provisions of the Data Protection Act (DPA). Any breach could result in a company losing its DPA licence and, as a result, its ability to trade.

Publicly available information (black data) gives Electoral Roll information and County Court information about Judgements (CCJs) and Decrees (in Scotland), Bankruptcy Orders, Individual Voluntary Arrangements (IVAs) and disqualified Directors.

Membership of ‘closed user’ groups gives access to payment performance data on loans, mortgages, credit cards, mobile phones, and mail order accounts etc. This is called white data and is available to lenders via Insight (Equifax) and CAIS (Experian).

Most lenders have access to both black and white data, which enables underwriters to confirm an applicant’s address and to assess his/her, payment history and ability to afford a new loan (affordability), bases on credit cards, credit facilities outstanding, and income details obtained.

The information provided by credit reference agencies varies widely, as does the cost of the search, and the searcher should seek the report that best fits the needs or reasons for the search.