Credit Searches - Treasury Contents

3  Credit reference files


12. As we have seen, credit reference searches have a growing importance in the credit application process. We therefore reflected on the need for consumers' records to be accurate and updated frequently. It was worrying that Mr Van der Meer suggested that all was not well with the information being held by the credit reference agencies. He noted that "anecdotally, from feedback on our forums, a lot of consumers, when they check their credit file, find issues with the quality of the data and then feel the need to take action".[21] Mr Lewis highlighted how such errors on a credit reference file could create a negative feedback loop with multiple searches:

You have got an error on your file and you apply and you are then rejected because there is an error on your file. You then make other applications and then later on find out that there is an error, go back to fix the error, but now, when you are applying, you get rejected because of all those searches that you have done trying to make applications successfully, and that is a vicious spiral which adds to this.[22]

Mr Van der Meer noted that some consumers would not check their own files, and that therefore "What we do not know is how many consumers do not look at their credit file and are impacted [by poor data quality]".[23]

13. Industry witnesses were quick to defend data quality. Mr Leenders told us that he thought "the vast majority of data is very accurate".[24] He noted that, from the lenders and credit reference agencies' perspectives, "it is in all our interests to make sure that data is accurate".[25] Experian stated that "The quality of data at the credit reference agencies is continually checked".[26] Mr Holbrook was also convinced that the data held by the credit reference agencies was, in the main, correct:

Given the huge volumes of data which we are talking about, hundreds of millions of records, it is inevitable that some of it will be inaccurate. That will always be the case. However, I have to say that our experience is that the overwhelming majority of credit reference data is highly accurate. I am satisfied that the agencies place very great store by ensuring that their clients do adhere to high standards of accurate reporting of the information that they hold. After all, it is in the agencies' business interests to make sure it is recorded properly. We are satisfied that they do.[27]

However, he conceded that in a year the ICO received "in the region of 100 or so genuine complaints about accuracy".[28] Mr Holbrook also confirmed that the ICO conducts no audits of the quality of the information held by the credit reference agencies.[29] Instead, the ICO uses consumer complaints and regular meetings with each of the agencies.[30]

14. Given the importance of credit reference files to consumers who wish to access credit, we believe the assurance of data quality is paramount. We therefore recommend the ICO consider whether it should seek further assurances that data quality and data correction systems at credit reference agencies conform with the Data Protection Act, potentially by independent audit. There are concerns that credit applications rejected because of incorrect data may remain on file and affect future credit scoring, because being rejected for credit is seen as an indicator of risk. Accordingly, we also recommend that the Information Commissioner's Office considers whether it is fair for credit reference files to contain details of consumer application searches made while credit reference files were demonstrably incorrect.


15. Though there was a strong defence of the quality of the data held by the CRAs by the industry, they admitted that consumers would be advised to check their credit records. Experian stated that "consumers are encouraged to check their credit report before applying for credit to make sure it is correct and up to date".[31] Ms Smith, of Callcredit Information Group, explained that people may want to check their own credit records for a wider set of reasons than just spotting mistakes:

people want to access their credit file to make sure, certainly, what is on there is correct […] They also use it to alert any possibility of fraud, particularly if they think that their credit card details or something else may have been cloned or used by someone else.Just, basically, to keep an eye on total financial management.[32]

However statistics provided by Experian showed that while 80% of people were aware of the existence of credit reference agencies, only about 23% of people had, at some stage, sent for their credit report.[33]

16. The Data Protection Act 1998 provides for individuals to access the data organisations hold about them.[34] Where the data controller is a credit reference agency, further provisions on providing this data apply, one of which allows the individual to "limit his request to personal data relevant to his financial standing".[35] The cost of such a statutory credit report is currently set at £2,[36] though some companies will provide similar information free in trial periods of their other consumer products.[37] The Council of Mortgage Lenders suggested it could be wise to remove the fee, arguing that "it does seem unfair that consumers have to pay for access to their own data".[38] For the industry, Ms Key-Vice outlined the importance of the statutory report, telling us that 1 in 6 people applied for a statutory report rather than Experian's own consumer products.[39] When asked why consumers should be charged for their statutory report, Ms Key-Vice told us that "Two pounds is quite a modest fee".[40] This price also seemed reasonable to the Information Commissioner's Office. Mr Holbrook told us that the £2 charge was "a fair administrative charge".[41] He noted that:

it is fair that [the credit reference agencies] should be able to cover their costs. They are already obliged to produce this information at a fifth of the price that anybody else would be entitled to charge for giving you your own personal information.[42]

While a £2 fee for a consumer to receive their statutory credit file may seem modest, given that there are three potential providers of such reports, and regular checking may be appropriate, costs may begin to add up. We recommend that the OFT and the ICO consider again whether the charge remains reasonable. In particular, given the key role credit reports play, and the fact that relatively few consumers request their credit reports, they should consider whether there is a case for providing free access to increase take-up.


17. The ICO noted that "This is a complex and technical area which consumers are likely to find confusing, not least because of the array of different types of searches of their credit files which may be made by organisations, and the different ways they impact on a consumer's credit standing."[43] It is important that consumers have a clear understanding of their own statutory credit reports. We raised the issue of whether or not such statutory reports were clear. Mr Holbrook responded that:

I think, as ever, there is always room for improvement. A standard statutory credit file is not the easiest thing to read—there is no doubt about that. I do think there is an onus on the agencies to make the information intelligible. I think that they do go to some lengths to help people understand, but there is no doubt that credit referencing is something that is difficult to understand if you have had no previous involvement with it. The ICO publishes a leaflet called Credit Explained in which we try to shed some light on what credit referencing is about and how consumers' data is used in the credit process. We actually distribute far more of that publication than anything else we produce.[44]

He also acknowledged that some consumers needed help in interpreting the statutory credit reports they received.[45] Experian pointed out though that "When a consumer obtains their file from a credit reference agency they are also provided with a detailed guide on the data and what to do if they want to make any query about it. They have access to trained advisors either by e-mail, post or telephone as part of the service".[46] Given the complexity of the information presented in consumer credit reference files, we recommend that the OFT and the ICO review the information presented in statutory credit reports, and any supporting documentation and assistance the credit reference agencies provide, and provide guidance on how best to ensure consumers understand this.

21   Q 18 Back

22   Q 19 Back

23   Q 18 Back

24   Q 159 Back

25   Q 159 Back

26   Ev 74 Back

27   Q 205 Back

28   Q 207 Back

29   Q 226 Back

30   Qq 225, 227 Back

31   Ev 74 Back

32   Q 146 Back

33   Q 154 Back

34   Data Protection Act 1998, section 7 Back

35   Data Protection Act 1998, section 9 Back

36   The Data Protection (Subject Access) (Fees and Miscellaneous Provisions) Regulations 2000 (SI 2000/191) Back

37   Q 124 Back

38   Ev 62 Back

39   Q 128 Back

40   Q 153 Back

41   Q 222 Back

42   Q 220 Back

43   Ev 38 Back

44   Q 210 Back

45   Q 211 Back

46   Ev 74 Back

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Prepared 22 December 2009