It was a dream job. Debbie Scott beat other candidates to win a six-month rolling contract as IT security manager at Lloyds Banking Group. The role commanded a large salary, but she never got as far as her desk. A mistake on her credit record wrongly identified her as a bankrupt and her new job was re-advertised before she’d had a chance to start it.
“It’s difficult to convey how much stress it has caused,” says Scott, who has spent 22 years as an IT contractor. “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.
“It’s unlikely I’ll secure another senior management contract because I had to take a lower-grade job and employers are only interested in the last role a contractor has performed.”
Although modern commerce depends on credit, many people are unaware of the private companies which make or break their financial decisions.
Credit reference agencies (CRAs) collect, store and rate information about the spending of every adult in the UK, from their loans to their mobile-phone contracts. The data is submitted by financial services firms and companies can access it for a fee and use it to decide whether a customer is likely to pay their way. A single late or missed payment affects a credit record for six years and individuals can’t opt out of their information being stored and shared.
It’s a system that enables credit applications to be processed swiftly, but it means that a single error can cost someone a job or a home. A customer can be denied a mortgage because a CRA has omitted to record their address correctly. If a company wrongly reports a debt, however small, that customer will struggle to take out a mobile-phone contract or open a utility account.
One Observer reader lost the house she was buying because of a £10 default recorded by a service provider she’d never used; another was refused credit because a CRA deemed his unusual surname invalid.
Scott’s situation was more sinister because the error did not appear on the report she had viewed, so she could not challenge it.
Three years ago, she had applied for a mortgage and been turned down. She found she had been wrongly listed as an involuntary bankrupt eight years after falling victim to ID fraud. A court annulled the bankruptcy order and she asked the three CRAs to update their records. “Twenty eight days later I re-ran my credit checks and confirmed the bankruptcy had been removed and I successfully reapplied for the mortgage,” she says.
Unbeknown to her, the Lloyds vetting procedure asked for credit reports against her previous name and addresses.
It turned out, due to an oversight, the phantom bankruptcy was still listed under an old address under her old surname, which is why it was not visible when she checked. Nor could she spot it after Lloyds raised concerns. “I obtained new credit reports from all agencies and the bankruptcy was not on any of them,” she says. “I was told I would be unable to start work at Lloyds until the bankruptcy was removed. It was only because I had set up job alerts that I realised my job had been readvertised.
“In fairness, I wouldn’t employ a bankrupt who was applying for a senior role within an IT security department and hadn’t declared it on their vetting form!”
Over the ensuing six weeks, Scott says she was in daily contact with credit reporting agency TransUnion to identify the source of the error. Meanwhile, Lloyds began interviewing new candidates. “I pleaded with Lloyds to allow me on site and provided evidence of the annulment, but they declined,” she says.
Eventually, after six weeks without income, she could no longer afford to remain in limbo and secured a lower-grade contract at another firm which did not use the same vetting procedure. “I made one last plea to Lloyds without success so I began a six-month contract on much lower pay,” she says.
Scott fears the error may affect the rest of her career. “In this sector you are only as good as your last contract,” she says. “I’ve since applied for two senior manager roles and didn’t even make it to interview stage which, for me, is a first.”
TransUnion admits it made a mistake. “We devote considerable effort and expertise to ensure we match all incoming data correctly, so we get the most complete picture possible of an individual’s identity and credit history. Unfortunately, in this instance, we fell short of our usual high standards and Ms Scott’s record was not updated correctly,” it says. “The bankruptcy was linked to a previous name and address, and had not been associated with the current address, so it was not visible on all the reports – as should have been the case – and this delayed the correction process.”
The company offered Scott compensation twice over 12 months but she dismissed the sums as derisory, given the earnings the mistake has cost her. Lloyds declined to comment on the case.
It’s estimated that more than 40% of those who check their credit record find a mistake. Millions more might be unaware of erroneous information held about them since companies are not legally obliged to issue a default notice before recording a debt.
Not only do consumers have no say in what information is held on their personal affairs, but they are not able to amend mistakes themselves.
Only the company that submitted the data can issue a correction and this can take up to 28 days. If they refuse, all a consumer can do is submit a notice of correction which will appear beside the entry to show that it’s disputed. Moreover, lenders can subscribe to one or all of the CRAs which do not share data, so consumers have to obtain a credit report from all three to check that their details are accurate.
Consumers whose credit record is undermined by an error can take their case to the Information Commissioner’s Office, which regulates CRAs, or to the Financial Ombudsman Service.
Scott plans to go to court. She says that TransUnion’s mistake has lost her more than £30,000 in earnings over the last 12 months and is likely to cost her many thousands more if she fails to secure another senior management contract. “Credit agencies can ruin people’s lives,” she says. “As far as I’m concerned, TransUnion has ruined my career and it’s not being held accountable.”
How to stay creditworthy
• CRAs are required by law to provide consumers with their credit report for free and, since data held by the three main CRAs may differ, it’s wise to obtain reports from all of them. Check your address and the accounts listed are accurate, and that searches (made by lenders when you ask for a quote or apply for credit) were instigated by you and that a late or missed payment hasn’t been erroneously recorded. Any information about financial associates listed on your record – eg, someone you hold a joint mortgage or account with – can also affect you.
• Repeated applications for credit over a short period, including for mobile phone contracts, show on your record and can affect your credit rating, so ask for a quote rather than an offer. This won’t leave a footprint on your credit file. If you are turned down, check credit records for a missed payment or an error before applying elsewhere.
• Credit records can take up to six weeks to update. If you spot an error, contact the lender first. If they admit a mistake, they have one month to correct it. If they don’t, complain to the CRA, which will put a dispute notice on the file while it’s investigated. If the lender still refuses an amendment you can issue a notice of correction displayed alongside which shows you dispute the information.
• If you’ve been a victim of ID fraud, fraud prevention service Cifas will put a marker on your file for 13 months to warn lenders. If you fear your personal details may have been stolen, you can pay Cifas £25 for a two-year protective registration service which warns lenders to make extra checks if applications are made in your name.
• 58% of adults don’t realise failing to register on the electoral roll affects their credit rating; a third wrongly believe a student loan has an impact on their rating; and 86% assumed CRAs operate a credit blacklist, according to a survey published by credit experts TotallyMoney.