Millions could face financial disaster due to hidden credit files errors

Consumers are being warned they could they could lose their homes – or face other huge problems – because of accounting errors they know nothing about.

Around 10 million British adults have found errors on their credit files, inaccuracies that could mean they are refused mobile phone contracts, utilities deals, credit cards, personal loans and even the finance for their homes.

More than two in five of those who have checked their financial records have found problems. But the real number could be far higher because so few people check the records kept on them.

An individual’s credit file is generated when they agree to a financial contract. They include everything from store card agreements to mortgages, electricity and gas deals and everything in between.

The provider of the service reports the status of that contract to one or more credit reference agencies, gradually building a detailed profile that indicates financial reliability – a snapshot of whether they are likely to stick to their side of an agreement based on their recent history.

Silent disaster

Errors regularly creep into the system in large part because a large number of people and systems are involved in the reporting process, but fraudulent activity could wreak havoc and even being linked to another individual’s financial history can have consequences for your own financial future.

Issues can range from a misspelled address to an inaccurately reported payment default, which can and does result in being refused credit for everything from the energy to heat your home to a new TV contract.

For those applying for a new mortgage for example, the consequences could include being refused a loan and becoming stuck on an expensive standard variable rate if they already have a property. For those trying to get on the housing ladder, they could lose out altogether.

And yet only 15 per cent of those who find inaccuracies have attempted to get them resolved, according to research from Amigo Loans - itself a high cost loan provider charging a typical 49.9 per cent APR on guarantor loans.

The greatest challenge to rectifying problems is widespread confusion over which organisations are responsible for the accuracy of credit files and which have the power to change them.

Despite so many errors being found, just one in seven know how to report them to a credit rating agency. Almost one in ten spoke with their bank or provider, which cannot help and a similar number turned to family and friends for advice.

The study also found that only two in five of people have actually checked their credit report, with just one in five looking in the past month. This means the number of people with errors on credit reports could be far in excess of 10 million.

There’s also a demographic difference too – probably based on the level of financial activity.

The proportion of people who have spotted mistakes on their report was highest among those aged 18-24 years, while those aged 55 and older were the least likely.

Kelly Davies, Chief Communications Officer at Amigo Loans: “We’d like to see this system changed. It’s not an easy job with a number of different credit reference agencies, all holding slightly different information, using words and formats people aren’t familiar with. But it’s worth a bit of effort.”

How to change your file

If you’ve made the effort to check your credit file with a credit reference agency and spotted a problem, you have two choices.

The first is to pay a credit file correction company to sort it out for you, which could cost you hundreds of pounds. Or you could do it yourself. It’s a longwinded and often frustrating process, particularly as the onus is on you to chase for errors to be rectified that were no fault of your own, but ultimately worth it.

“Your first port of call should be the provider or creditor the error was associated with. So if your credit card company recorded that you missed a payment and you want to dispute that, call up the credit card company,” advises uSwitch.com.

“You should obviously have some evidence of the error being in fact an error, so any receipts or statements will be useful. If the credit card company agrees that it was an error, they have to update their records within a one-month period, and this update goes out to the credit reference agency.

“However, if the credit card company says that they have no record of the error and everything is correct on their side, then speak to the credit reference agency. They will review the error and make the relevant changes after an investigation into the dispute.

“You should then also check your credit report with the other credit reference agencies to ensure that they too do not have the same error.”

8 ways to improve your credit score

1. Double check you’re on the electoral register. Lenders use the electoral register to confirm an individual’s address and location and fight against identity fraud.

2. Try not to have a high balance on your credit card. Lenders may view this as excessive debt and think you have an inability to repay.

3. Make sure to pay your bills on time, or ahead of time, a good credit score will be built up over time.

4. Do not make multiple applications for credit as this can impact your record negatively.

5. If you notice anything unexpected on your credit report you could be a victim of identity fraud. Contact the credit reference agency who will try to resolve the issue, alongside the lender.

6. Only apply for credit as necessary – applying for more than four a year can lower your score.

7. Cancel old credit card agreements and out of date credit cards, such as store cards you no longer use, as this will still show on your file. Lenders will be cautious about the possible size of your debt.

8. If you are divorced or separated, cut all financial ties and make sure your former partner’s details are eliminated from any joint accounts. The credit history of anyone you are financially associated with, such as a joint bank account with a spouse, can affect your credit rating.

Source: Amigo Loans