What is life without money?
The integral part of one’s life leading it comfortable and happy is finance. It is the central thing for which masses struggle and search for various mediums for producing it in greater amounts.
Life often leads to very steep curves in the form of various financial problems. Such as:
- Short term liquidity scarcity for small and medium businesses; or
- Even the lack of enough funds for an employed person to treat his mother in a good hospital
Other financial emergencies also exist in varied kinds like a need for funds for higher studies, purchasing a commercial property, weddings, etc. In addition, one of the most popular ways by which people fulfil this monetary gap is through taking loans.
Secured or unsecured, short term or long term, funding assistance through loans fill in the void gap for fulfilling any type of financial need.
However, the process of getting the sanction for any loan is not easy.
The banks and lenders to determine the creditworthiness of the applicant along with the probability of future defaults carefully evaluate many considerations. Moreover, in this regard, the role of credit score is very crucial.
WHAT ARE CREDIT SCORES??
A credit score is a measurement and comparison tool used by many banks and agencies to gauge the past debt history of an applicant and make decisions based on it.
How an applicant had done servicing of past debts along with default rates, supporting documents all assist in making lenders a wise decision to sanction the application or not.
In this regard, the role of the Credit Reporting Agency or CRA is imperative. Not many people are aware of the role of CRAs in assisting people to gain various loans.
WHAT IS A CREDIT REPORTING AGENCY??
A Credit Reporting Agency is an information bureau that collects and publishes credit information of people in the UK. This is an agency that has a large database of various information regarding individuals collected for gaining useful insights into their past credit payment behaviours.
To measure this aspect of the creditworthiness of a person, these agencies give a credit report of each person with a credit score.
Banks, employers, Governmental agencies, requiring information about a person’s past loan history can request this report.
There are three main in CRAs in the UK, namely, Experian, Call Credit, and Equifax. Many lenders follow either of these agencies to perusal the borrowers’ credit history.
One significant thing is there to notice here. Some direct lenders do offer loans with no credit assessment, but it does not mean that they do not approach these agencies. Instead, they do the soft credit check especially providing small loans like doorstep loans. Just a few clicks on the website of the company will enable its agents to visit the premises and complete all loan application formalities after the initial credit check from these agencies.
ROLE OF CREDIT REPORTING AGENCIES
The main role of CRAs includes:
- Collecting and maintaining data
- Helping companies make decisions
- Upgrading of data, regularly
- Preventing data theft and its breach
- Determine the number of times of defaults of data with various prospective lenders, landlords or employers upon their request
- Responsible sharing of data after complying with privacy norms
- Assist in people gain various types of credit/loans
- Issue credit reports which are updated every 4 to 6 weeks
WHAT INFORMATION DOES CRAs HOLD
- Name, current address and previous addresses from the past six years
- Whether you’re registered on the electoral roll or not
- How many bank accounts a person had in the past six years, and the dates of its opening
- Regular repayments, intervals, manner, etc.
- Amount of credit spent and remaining for use
- Details of people associated like partners etc. with who joint mortgage or any other lending transaction was there
- Details of defaults, County Court Judgements, or bankruptcy proceedings in the past six years
SOURCES OF DATA FOR CRAs
The CRAs collect data regularly for giving useful credit insights for various third party agencies in the form of credit reports.
This data is majorly collected from
- Various companies a person has relationship/contact with like banks, credit card providers, utility suppliers, and mobile phone companies.
- Electoral roll, if a person has given information, as many people in the UK do not have electoral roll records
- Court records
- Other Public databases offer to give information on a paid basis.
The fuss about a person’s future behaviour regarding the perfect servicing of the loan, especially when his/her credit score is low is relevant or when the borrower is applying for no guarantor loans for bad credit from direct lender.
However, many upcoming and new age lending companies understand the monetary situation of the young and vivacious Britishers and thus provide them hassle-free funding assistance.
