How to clean your credit record

Borrowers turned down for a loan may have fallen foul of the debt detectives. John Givens explains

PEOPLE who are turned down for mortgages or other loans are often victims of the increasing trend among lenders to use credit reference agencies to help make a lending decision.

The huge rise in bad debts over the last few years has seen more and more banks, building societies and other financial institutions turning to these agencies for information on their potential borrowers.

However, many people may not even know their personal records are being passed on to lenders, let alone the sort of information their files might contain. The two leading players in the credit reference market, CCN Credit Systems and Equifax Europe, both hold personal credit information on around 44 million Britons. Everyone over the age of 18 and listed on the electoral register is likely to have a file.

Lenders are able to access files through computer links and use the information as an integral part of the process of deciding whether or not to grant a loan. The files record facts about individuals that include addresses where they are listed as living on the electoral register, any credit searches during the previous 12 months, and an individual's previous and present credit standing.

This includes any adverse credit information, such as county court judgments, bankruptcies or voluntary arrangements, that is likely to lead a lender not to sanction borrowing.

The exact amount of information listed on an individual's file depends on which financial organisations the person has dealt with in the past.

CCN Credit Systems, in Nottingham, has more than 200 clients, including banks, building societies and credit card companies, which supply and update credit information about their customers. Every credit arrangement a person has with one of CCN's clients will be included on the file.

This might include bank loans, credit cards, store cards, rental agreements and even the individual's membership of certain clubs and societies. The information on the file will tell a lender if a customer has kept up to date with other credit commitments, and gives a monthly repayment history going back as far as three years, highlighting any arrears.

It may also identify debts that the customer did not admit to when applying to the lender for a new credit facility.

Although the information may help a lender avoid giving credit to a customer with a bad financial history, it may also convince the company of an individual's ability to run his or her financial affairs competently.

Barclays Bank uses information from the two credit reference agencies for all its lending applications.

Len Sinclair, the assistant director of risk management at Barclays, said the information was used in conjunction with other checks before granting a loan.

"We use information from credit agencies as part of the overall process of assessing a lending proposition, which also includes an interview and, in the case of personal loan applications, credit scoring. What the agencies supply us with helps us to know if there are any other questions we should be asking, or any additional information we need before making a decision."

Mr Sinclair said an adverse entry on a personal file did not necessarily mean the customer would not get the borrowing facility applied for. "Sometimes people have good reasons for running into financial troubles," he explained.

"For example, during the miners' strike in the mid-1980s, many financial organisations were registering defaults against people who were unable to meet their commitments because they weren't earning.

"When the strike ended and the miners went back to work, many were having problems getting credit because of these entries on their credit files.

"It got to the point where we were often ignoring the information because we understood what had happened."

The information included on a file is strictly regulated by the 1974 Consumer Credit Act. Although no one has the right to ask the credit agencies to delete records altogether, we are all entitled to obtain a copies of our own files, by writing to the relevant agency and enclosing a cheque or postal order for £1. The agencies are obliged to send out files within seven days of receiving a request.

If applicants finds adverse entries that they disagree with, they have the right to ask that they be amended or removed. This has to be done in writing and must include evidence that the entry is incorrect.

If the agency does not agree the entry is incorrect and refuses to alter or remove it, the consumer has the right to ask for a written statement of up to 200 words to be included on the file to record his or her dissent.

Dermot Maurer, marketing manager for Equifax Europe in London, said mistakes could happen, although there were controls to help prevent this. He said: "Last year only 0.02 per cent of the hundreds of thousands of people who we sent files out to came back to us with queries.

"I think this proves there are sufficient safeguards in place to make sure as few errors as possible appear on people's files."

Alasdair Warwood, a director of CCN, said that he believed the role played by the credit agencies was a positive one.

He said: "The large majority of the information we supply to lenders is positive. This helps people to get credit because lenders can see quickly, and cheaply, that they have a good track record.

"I also think it helps financial institutions to lend sensibly," Mr Warwood said.

o Details may be obtained from: Equifax Europe, Spectrum House, 1A North Avenue, Clydebank, Glasgow G81 2DR, and from CCN Credit Systems, Consumer Affairs Department, PO Box 40, Nottingham NG7 2SS.

Best deposit rates

INSTANT ACCESS Telephone Account Notice Deposit Rate Interest

or term % interval

Yorkshire BS 0800 378836 1st Class Access Postal £1,000 6.20 Year

Skipton BS 01756 700511 3 High Street Instant £2,000 6.25 Year

Northern Rock BS 0500 505000 Go Direct Postal £20,000 6.70 Year

Nottingham BS 0115 948 1444 Post Mark Postal* £25,000 7.25 Year

NOTICE ACCOUNTS

Bradford & Bingley BS 0345 248248 Direct Notice 30 day (P) £10,000 6.90 Year

Coventry BS 0345 665522 Postal 50 50 day (P) £2,000 6.55 Year

Scarborough BS 01723 368155 Scarborough 50 50 day (P) £25,000 7.35 Year

Northern Rock BS 0500 505000 Postal 60 60 day (P) £50,000 7.25 Year

TERM ACCOUNTS

Portman BS 01202 292444 Fixed Interest Bond 1 year £500 7.00 fixed Year

Halifax BS 0422 333333 Guaranteed Reserve 1 year £10,000 7.20 fixed Year

Birmingham Midshires BS 0500 710710 Quantum Fixed 2 year £5,000 8.15 fixed Year

Woolwich BS 0800 400900 3 yr fixed rate bond 3 year £500 8.50 fixed Year

MONTHLY INTEREST

Birmingham Midshires BS 01902 710710 First Class Postal £1,000 4.79 Month

Britannia BS 01538 392808 Capital Trust Postal £2,000 5.84 Month

£10,000 6.17 Month

£25,000 6.41 Month

TESSAS (tax-exempt special savings accounts)

Sun Banking Corp 01438 744500 5 year £8,900 8.50 fixed Year

Market Harborough BS 01858 463244 5 year £9,000 7.75 Year

Hinckley & Rugby BS 0800 774499 5 year £3,000 7.65 Year

Barclays Bank 0800 400100 5 year £1,000 7.50 Year

HIGH-INTEREST CHEQUE ACCOUNTS

Woolwich BS 0800 400900 Current Instant £500 3.85 Year

Halifax BS 01422 333333 Asset Reserve Instant £5,000 5.00 3 Months

Chelsea BS 0800 717515 Classic Postal Instant £2,500 6.00 Year

£25,000 6.50 Year

OFFSHORE (gross)

Portman Channel Islands 01481 822747 Instant Gold Instant £5,000 6.20 Year

Derbyshire IOM 01624 663432 Instant Access Instant £25,000 6.65 Year

Bradford & Bingley IOM 01624 661868 Island Ninety 90 day £25,000 7.05 Year

Halifax JSY 01534 59840 Fixed Rate Intl 2 year £50,000 8.00 fixed Year

NATIONAL SAVINGS

Accounts & bonds (gross) Notice or term Deposit Rate % Interest interval

INVESTMENT ACCOUNTS 1 Month £20 5.25 Year

£500 5.75 Year

£25,000 6.00 Year

INCOME BONDS 3 Month £2,000 6.50 Month

£25,000 6.75 Month

CAPITAL BONDS (Series I) 5 Year £100 7.75 fixed Maturity

FIRST OPTION BONDS 12 Month £1,000 6.40 fixed Year

£20,000 6.80 fixed Year

PENSIONER'S GUARANTEED INCOME BOND (Series 2)

5 Year £500 7.50% fixed Month

NS Certificates (tax free)

42nd ISSUE 5 Year £100 5.85 fixed Maturity

8th INDEX-LINKED 5 Year £100 3.00+RPI Maturity

CHILDREN'S BOND (Issue G) 5 Year £25 7.85 fixed Maturity

P= by post only. *=7 day notice. =fixed for first 18 months. All rates are shown gross and are subject to change without notice.

Source: Chase de Vere Investments PLC - 0171 404 5766. Compiled on 6 April 1995

Best borrowing rates

MORTGAGES

Fixed rates Telephone Rate/period Max Fee Incentive

% advance % £

Yorkshire BS 0800 378836 1.90 to 1/4/96 95 £250 -

Northern Rock BS 0800 591500 5.49 to15/4/97 95 £250 Free valuation

Cheshire BS 0800 243278 7.49 to1/1/98 95 £250 -

Ipswich BS 01473 211021 8.25 to 1/1/99 95 - Free valuation - EBs

Northern Rock BS 0800 591500 8.54 to 15/4/00 95 £250 Free valuation

TSB Local branch 9.49 to 31/3/05 95 £250 Free valuation

Variable rates

Hinckley & Rugby BS 0800 774499 1.25 for 9 mths 70 - Free ASU & valuation

Coventry BS 0800 126125 2.00 to 1/6/96 95 - £300 cashback

Principality BS 0117 929 7804 5.25 to 1/6/97 90 - Free valuation

Greenwich BS 0181 858 8212 6.25 for 3 years 95 - £350 cashback - FTB

PERSONAL LOANS

Unsecured Telephone APR Fixed monthly payments on £3,000 for 3 years

% With insurance Without insurance

Midland Bank Local branch 15.40 £116.54 £103.14

National & Provincial BS 0800 808080 15.50 £118.22 £103.29

Clydesdale Bank 0141 248 7070 16.20 £113.94 £103.33

Secured Max advance % Max term

Royal Bank of Scotland 0800 161616 10.90 70 3 years to retirement

Midland Bank Local branch 11.40 80 5 to 30 years

First Direct 0800 222000 11.20 80 Up to 40 years

TYPICAL OVERDRAFTS

Telephone Authorised Unauthorised

EAR % EAR %

Barclays Bank Local Branch 19.20 29.80

Lloyds Bank Local Branch 19.40 26.80

National Westminster Bank Local Branch 18. 90 33.25

BEST OVERDRAFTS

Telephone Authorised Unauthorised

EAR % EAR %

Woolwich BS 0800 400900 9.50 29.50

Alliance & Leicester BS 0500 959595 9.50 29.80

Abbey National 0800 555100 9.90 29.50

CREDIT CARDS

Telephone Card name Minimum Rate APR Annual

income pm % % fee

Standard

Robert Fleming (S&P) 0800 282101 MasterCard/Visa - 1.00 14.60 £12

Royal Bank of Scotland 0800 161616 MasterCard - 1.14 14.50 -

TSB Local branch MasterCard/Visa - 1.38 17.90 -

Gold cards

Lloyds Bank Local branch MasterCard £20,000 1.15 16.50 £40

Midland Bank Local branch Visa £20,000 1.30 18.10 £35

MBNA International 0800 062620 MasterCard/Visa £20,000 1.45 18.90 -

STORE CARDS

Payment by direct debit Other methods

Telephone pm APR pm APR

John Lewis Local store - - 1.39 18.00

Marks and Spencer 01244 681681 1.90 25.30 2.00 26.80

Burtons Local store 1.97 26.30 2.21 29.90

EB=Existing borrower APR=Annualised percentage rate. EAR=effective annual rate.

All rates are subject to change without notice.Source: London & Country. Freephone 0800 373300 Compiled on 6 April 1995