One of the credit agency's major customers is a UK major clearing bank. Nearly all of the bank's credit card applications are sent off to the credit agency every evening and the following morning they are returned marked as OK or showing a potential fraud risk. Depending on other factors, the credit card may or may not contact the applicant.
Some mortgage lenders say that they use the main credit reference systems (the ones you and I can check easily and cheaply) and their decision to lend depends upon a satisfactory reference. They also check with the credit agency to make sure that nothing dishonest can be detected on the application.
As we said in our first part of this article, completely honest people could have an application turned down for totally innocent reasons. The credit agency considers an application to be "inconsistent" if there is a clear discrepancy between the information held by the agency about the consumer and information provided by the customer on the application. This means that the credit agency is simply unable to verify the information provided and this throws up a query.
If your application is turned down and you query the rejection, you're likely to be sent a standard letter from the lender which will refer you to the usual credit agencies. You'll not be informed about which credit agency they used and that creates a big problem. Some credit agencies don't publicise their existence or even provide a full address, beyond a PO Box number (which in this case belongs to an insignificant office on a back street in Stoke-on-Trent)
A spokesman for the credit agency said "Any member of the public who wishes to obtain details about the information we hold about themselves as individuals, can request the information under Section 7 of the Data Protection Act.". But they did admit that it was sometimes difficult to find out about them or even be aware of their existence.
Apparently lenders using that credit agency are supposed to include certain elements within the declaration and fair processing section of the application documents. The wording should give an indication of which fraud protection agencies are used and how to find this information.
The credit agency says "Our members must ensure that this information is made readily available to the applicant and preferably by the means of a dedicated phone number. If you ask your bank, it has to tell you of our existence."
They said that in their opinion, lenders should not base their lending decision on just one alert. Automated decisions are not allowed and they would be concerned if this was happening. Concern has also been expressed by the Information Commissioner, who has responsibility for data protection issues, regarding the rejection of application solely on information that can not be validated. He says that no database can be one hundred per cent foolproof.
We think that the credit agency could be more visible, something that the agency accepts. Clearly fraud and identity theft is of concern, but open-ness in checking applications would surely reduce the number of mistakes which can cause subsequent problems for loan applicants.
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