23 July 2015
Credit reference agencies – a modern necessity or a modern nightmare?
by Lynda Goetz
A friend of mine has been tearing his hair out for the last 10 days. The reason? An attempt to get a buy-to-let mortgage for a small property which he had originally decided to buy outright, but then concluded it made more sense to use mortgage finance to purchase. As he knew he had a long-standing blemish-free financial record; that the amount he would receive in rent covered, by more than 125%, the amount he was planning on borrowing; that his annual income, although he is retired, was more than adequate to satisfy all the mortgage lenders he had checked out; that he was already a landlord with two properties in his portfolio; that the money from a recently sold third property was providing the cash for the deposit and that the property in which he lived was in his own name and mortgage-free, he was not expecting any difficulties in obtaining a mortgage at the most competitive rates. That is, until he was refused finance by Virgin Money on the grounds that his credit rating as checked with Experian was not good enough.
The broker he was using, London and County, suggested he check his credit report. He told them that when he had last checked he had a perfect score, but that he would obviously check again and send them a copy of this. On attempting to reactivate the membership he had last paid for back in January, the online log-on system advised he could not use his email as that was being used by someone else (in fact, of course, only he was using it). When eventually he had managed to set up a new membership, it turned out to have none of his details on it and gave him a score of 777. Was this what creditors were seeing, he wondered? After some time spent on the phone to Experian he was told that they had been able to ‘reactivate’ his old membership and the ‘excellent’ score he was expecting appeared on his screen. Perfect! Now, he thought, all he had to do was send this to the mortgage broker and things would be sorted out. Unfortunately his optimism proved premature. A week and a second refusal from Virgin Money later he was still trying to resolve a problem which appeared to be related to the way his address appeared on his credit report. His was not a straightforward address. There was a house name and not a number, which should not, of itself, have caused a problem, but for some reason part of the house name appeared to have been excised from where it should have been and had been added as a district lower down the address. This made his address incompatible with the address he had given to the mortgage broker for his application and with his address as recorded on the Electoral Register. He got back on the phone to Experian’s ‘CreditExpert’ service.
It transpired that Experian had incorrectly recorded his address, in a different incorrect way from that on his ‘Personal Details’, but in exactly the same gobbledygook way each time, on every single one of his credit card and mortgage records. They took no responsibility for any inaccurate recording of information and claimed that he needed to go back to all these different organisations, and in particular to the local authority responsible for the Electoral Register, to apply to them to resend correct information. This they said could take 6-8 weeks to appear on his credit report. He did not have 6-8 weeks, he pointed out as calmly as possible. He was hoping to have purchased his house by that time!
Much to my friend’s surprise, the lady he spoke to in the council offices was not only helpful, but acted immediately and sent him a ‘Letter of Residency’ within the hour, confirming that he had indeed lived at his address for X number of years and that said address was correctly recorded on their register. CreditExpert then claimed they could not act on that letter, but would have to conduct their own enquiries with the council to establish how the data was recorded and sent to them. As for all the other organisations, nothing could seemingly induce Experian to admit any liability for the inaccuracies on their system until someone in one of the mortgage companies was persuaded by my friend to get in touch with CreditExpert directly. Finally, they apparently conceded that the problem may have been theirs and confirmed that by 8am the following day it would be rectified. It wasn’t. The saga is still ongoing, much to the despair of my friend who is very concerned that he may end up trying the patience of his vendors a little too far and lose his purchase. The broker claimed that there was nothing he could do and that there was no direct recourse to Virgin Money once they had made a decision based on a failed credit report. My friend’s initial calls to Virgin Money met with similar responses, although it does seem that his persistence may be paying off as someone a little higher up the food chain is now ‘looking into’ his case. In the meantime, he has been checking out other mortgagees and a different broker, but fears that the issue of the address may result in refusals elsewhere. According to an article written on MoneySuperMarket’s website in April 2013, inaccuracies in addresses are a not infrequent problem and the discrepancy can be as minor as the fact that the prospective mortgagee has elements of the address on one line and Experian has them on two!
How have we got to the point where an organisation like Experian can make or break deals for the ordinary consumer, particularly if these are on the grounds of inaccurate recording on the ‘system’? On its Experian Plc website, Experian traces its roots back to 1826, although this appears to be a little disingenuous as, in reality, Experian, as we know it today, has really only existed for less than 20 years, since 1996. In 1826 apparently ‘a group of London merchants started swapping information on customers who fail to settle their debts. One such association, The Manchester Guardian Society, formed in 1826, later became an integral part of Experian’. Whether this organisation had anything to do with the businessmen who formed the Manchester Guardian newspaper is hard to ascertain, but that would seem quite likely. The Guardian was formed in 1821. In 1900, Great Universal stores (GUS) was formed, also in Manchester. It became one of the largest UK mail order companies and its ‘vast stores of data gave birth to Experian’s UK operations’. By 1996 the US businesses enumerated on the website, which had been operating since 1897, merged with the UK companies under the ownership of GUS, forming Experian. By 2007, Experian had taken a controlling interest in Serasa, ‘the world’s fourth largest credit bureau and the largest in Brazil’. By 2014, Experian is apparently pushing forward into ‘promising, new high-growth markets’ with its pioneering spirit as ‘strong as ever’.
That all sounds wonderful if you have shares in Experian, which was demerged from GUS in 2006 and launched on the London Stock Exchange as an independent company on 10th October of that year with a share price of £5.60. Those shares are now worth nearly £12.00. Perhaps my friend should abandon his attempts to get a mortgage to purchase property and buy shares in Experian plc instead. Their terrifyingly powerful grip on the credit reference market does not seem likely to slip away in the near future and as their website boasts, their ‘pioneering’ spirit is as strong as ever and they are sure to be pushing forward into new high-growth markets bringing good rewards for shareholders. On the other hand, perhaps that might not be too much of a bright idea – the dividend to shareholders is only just over 2%, rather lower than the yields they would be expecting their business clients to make from granting mortgages or their ‘members’ would expect to make from a buy-to-let property – if ‘the system’ ever allows them to get their hands on that mortgage.
