Updated 31 March 2022
Many in the UK remain unaware of how much their credit file may be influencing their lives. A simple scoring error derailed the career of IT manager Debbie Scott, while the cost of borrowing varies widely across the country – and credit data may even affect which ads you see. Article by Nick Green.
IT security manager Debbie Scott was delighted to be appointed to a six-month rolling contract working for the Lloyds Banking Group. However, disaster struck when a mistake on her credit file falsely indicated that she was bankrupt – a factor that would disqualify her from such a role. The job was offered to another candidate and Debbie was left facing a genuine crisis in her finances.
Speaking to the Observer, she revealed, ‘I was unemployed for six weeks while waiting for the bankruptcy to be removed from my record, and spent sleepless nights worrying about how I was going to pay my mortgage and bills.’ Debbie also explained how the blunder also damaged her long-term career prospects, as in order to pay the bills she had to take on a more junior position in the meantime. ‘Employers are only interested in the last role a contractor has performed,’ she said.
The problem was exacerbated by the fact that the alleged bankruptcy did not appear on Debbie’s own copy of the report, meaning that she was unaware of it until it was too late. The error had arisen three years previously, when she was the target of identity fraud and was wrongly listed as involuntarily bankrupt when applying for a mortgage. At her request three credit reference agencies (CRAs) had removed the false bankruptcy from their records, but failed to update the data held against her previous name and addresses.
The case highlights not only the fallibility of credit checks, but the devastating impact that any mistakes can have. Around 40 per cent of consumers who check their credit file find mistakes, and many others never get round to checking. Consequently, millions remain unaware of what information is held about them – and whether this information is true or not. Furthermore consumers are not able to correct mistakes themselves, as only the company that supplied the data can do this.
Consumers who fail to check their own credit files may miss the opportunity to have mistakes corrected, or to identify simple ways that they could improve their own credit score. Having a lower credit score makes borrowing more expensive as well as harder to obtain, so can prove very costly over time.
Average credit scores vary considerably across the different regions of the UK, which in turn can increase regional inequality. According to a survey by one CRA, Equifax, the South East of England enjoys the highest average credit scores, making borrowing much cheaper there. The lowest credit scores are found in the North East and North West of England, and in Angus in Scotland – though otherwise Scotland fares quite well, having a higher average score than London.
As for London, there is considerable disparity in credit scores between the boroughs. In a report by Experian, East and South-East London fall well below the capital’s average, whereas Richmond, Kingston and the City are (perhaps unsurprisingly) far above it. Experian estimates that improving a credit score by one category level (e.g. from ‘poor’ to ‘fair’) could reduce the APR offered on a loan by around 2 per cent. This should also result in a far greater choice of mortgage deals.
A more worrying development in the world of credit scores is the suggestion that they may be used in targeted advertising. A report in The Intercept cites an anonymous source from Facebook who claims that the social media platform has developed the means to target ads at users based on their credit rating, via a project called ‘Actionable Insights’. Facebook have strenuously denied this, saying, ‘We do not, nor have we ever, rated people’s credit worthiness for Actionable Insights or across ads and Facebook does not use people’s credit information in how we show ads.’ However, the statement stopped short of saying that Facebook had no plans to do this in the future.
Whether it is true or just a rumour, the Facebook story is another reminder that one’s credit score is a powerful chunk of personal data, with the potential for both positive and negative effects. It’s up to everyone therefore to take responsibility for their own credit records, make themselves aware of what information is held on them, and take whatever steps are necessary to optimise their score.