What does 'Credit Agency' mean when buying a property?

Find out what Credit Agency means when you are buying a property. 'What does Credit Agency mean?' plus over 150 other property related terms and jargon in plain English

Credit Agency

Also known as Credit Score Agencies - if you need a mortgage to buy a property they are going to be involved. So who are they and how can you make sure they work for you, not against you?

Credit Agencies gather all sorts of information about your current and financial past. Their main focus is to look for debts you have had and how you handled them.

  • Were you ever late with a payment?
  • Are you in arrears (still paying but not at the rate you agreed to)?
  • Did you ever end up in a court dispute with a lender?
  • How much debt do you have right now?
  • Have you recently been applying for more loans? - a clue that you are in financial trouble.
  • How many debts have you had over what time period?
  • How much credit is open to you right now? - say through unused or not fully used credit cards.

They might also have records of the addresses where you have lived and when which will reflect your general stability. They will look for "Black Holes" - times when you seemed to have no address, possibly because you lived abroad.

Each agency then has their own system of pushing this all together to give you a Credit Score (also known as a Credit Rating).

Most commonly this is a figure between 1 (don't lend to this person ever) and 999 (golden child to be wooed).

No debt, no credit agency record

Of course if you have been exceedingly careful with your money you may have made it all the way to this point in your life without ever needing a loan and thought this a positive thing. Perhaps it is but the net result is that you don't have a credit agency record (or you have a weak one) and you certainly don't have a good credit agency score.

From the mortgage lenders point of view they look at you and think "If you have never handled a small debt how do we know how you will handle a debt as large as a mortgage?". That makes you more of a risk than an asset.

So if you have stumbled on this page long before you plan to start property hunting my advice to you is to get in debt pronto.

This could be a simple as a credit card where you buy one thing every month and then pay it off the next (which means you pay no interest). In this way you build up a long and consistent record of having debt but also of having debt under control.

The mortgage lender and the credit agency

Mortgage lenders rarely keep vast records on everyone's debt dealings. It just doesn't make sense when they can go to a third party Credit Agency who specializes in offering this sort of service to all lenders be they mortgage providers, loan companies, credit card issuers or lettings agencies.

So when you apply for your mortgage one step the lender will be taking is to get your credit score / credit rating from a Credit Agency.

But this rating is not something only lenders can see, you can have a look at it yourself. My go to service for this is Experian but there are alternatives. To me Experian just seems to be more comprehensive in terms of the records it keeps but rarely will a lender tell you exactly who they use.

Why look up your credit rating?

Apart from for idle curiosity you should definitely do this in advance of your mortgage application because credit agents just attempt to gather information but they do not always have the full picture and you are fully within your rights to correct them if you see an error and can prove it so.

As we don't have personal identification numbers in the UK its common for things to get mixed up and for you to be confused with someone of a similar name or have a black mark put against your name because you lived at the same address as someone who wasn't quite so good with their debt management as you were.

Don't wait for the mortgage lender to uncover this and then turn down your application so you have to go through the loop twice - have a look and set any faulty records straight yourself right now.

Challenging the mortgage providers decision

If your mortgage provider comes back to you and says they are not prepared to offer you a mortgage because of your credit score (or they will offer you less than they initially agreed) you can take this up with them by showing them your squeeky clean Experian rating.

Remember if you found an issue with your Experian record that needed to be put straight there is every chance that error exists with all the other credit agencies.

Ultimately mortgage providers just want to lend you cash so they can make a profit on the interest ... but sometimes you need to help them out and I've always found them open to being corrected.

For tons more in the way of tricks that will lay the paving of a smooth property pick up a copy of my ebook How to Really Buy a Property.

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How to Really Buy a Property

"... than property so the months when it happened passed with almost no comment. In 2008 there was not much else to report except the global credit crunch and then the media wanted to talk to people in negative equity. What the press reports is often happening all the time, just because they..."
"... always people in negative equity in good times or bad There are always people who have bought problems on themselves There are always people who will misuse mortgages and credit The real question is how many people and is it actually a real problem. If for example there were 1,000 people in..."

"... than ever, since the start of the credit Crises, property prices in the United Kingdom have fragmented and so predictions at a national level hold little value to buyers. in 2012, for example, London property prices rose nearly 9% according to Land Registry while Scottish properties dropped 3%...."

"... credit crisis has decreased the number of new dwellings still further as construction companies struggled to raise finances for projects. This drop can clearly be seen in the graph above and was especially acute in the South East of England where the number of additional dwellings dropped by 32% in the financial year..."
"... by 32% in the financial year 2009-2010. Furthermore this annual reduction seems to have become permanent since the credit crisis. 2013 saw 118,540 new dwellings completed. At no time since 1975 have more homes been in demand and so few built. 2015 offers a glimmer of hope but at 155,080..."
"... a perfect example most people believe property prices in London rose non-stop between 2000 and 2008 (when the credit Crisis began) but the truth is very different. Prices fell three times. Once in 2001 by 6%; then again in 2004 by 3% and once more in 2005 by 4%. They were not year on year falls but quarter on quarter so the graphs that most of the media use for reporting showed..."
"... in property, just as some events cause the price of stocks and shares to plunge. Recent examples include the 9/11 attacks on the World Trade Centre in 2001, the war in Iraq in 2003 and the credit Crunch of 2008. For more information on this is and how it affects the market see Chapter 6:..."

"... credit crisis which started in 2008 also demonstrated this effect. Many foreign investors saw British property has a safe haven while stocks and shares were volatile. Switching their funds to UK bricks and mortar may have had an impact in the way real estate prices did not waiver that much during the..."
"...So can we tell if any particular property market is over-valued? Only if there are absolute crystal clear facts at our disposal. In the 2007 sub-prime mortgage market of North America it was obvious that most borrowers were not going to be able to pay back their loan when the initial promotional interest rate ended and the market was being supported by further such borrowers on further such unsustainable credit. ..."

"... cycle is moving into its' boom period. Eventually there is an event, such as the global credit crisis of 2008, which shakes confidence out of the system, and a bust occurs. Shares slide, property prices sink and the economy moves into recession. At this point, en masse, the population is..."

"... better companies become wilder in their claims about profit potential and many new and more suspect businesses also entered the field, all offering similar services. Long before the credit Crisis struck hundreds (perhaps thousands) were loosing money on purchases that were just simply overpriced, others were falling victim to full on scams where the investment company, developer, insurer, financier and sometimes even the surveyor providing the valuation, were..."

"... carry out most of the work for you. 100% Mortgages - If you shop around enough you will find 100% mortgages, even 125% mortgages. Although they have become much harder to find since the start of the credit Crisis they will creep back. These credit products are often frowned on as taking..."
"... credit products are often frowned on as taking the property market back to the bad old days of the early 1990s but as we have already seen in Understanding the Property Market, even if you had bought a property at the height of that boom, you would still be significantly better off today. Another way to look at it is..."
"... 125% mortgages are also useful in that they provide you with extra capital to improve the property. Done properly this will secure your investment's value. Further it may help rid you of credit card debts and other high interest loans that were stopping you raising the deposit in the first place. ..."

"... then we are prepared to lend you this much". The problem is that we often forget, or don't know it is important, that: credit card debt which will be counted against us, we haven't been in the country much in the last few years so have little credit history, we had an argument with a loan..."
"... forget, or don't know it is important, that: credit card debt which will be counted against us, we haven't been in the country much in the last few years so have little credit history, we had an argument with a loan company five years ago that went to court, we have moved home six..."
"... that went to court, we have moved home six times in the last three years and never got on the electoral register, we have never been in debt before and so have no credit history, we recently applied for other credit, even if it wasn't used, And so on, and so on. Sometimes you forget,..."
"... years and never got on the electoral register, we have never been in debt before and so have no credit history, we recently applied for other credit, even if it wasn't used, And so on, and so on. Sometimes you forget, sometimes you don't even know they are relevant, but each of the..."
"... Debts - if you are paying off a credit card or a small loan on a monthly basis, in the rush to apply for a mortgage you may forget about it. But the lender will find out and usually remove that amount from the mortgage application. In the worst case scenario they could refuse to lend to you because they are no longer confident you have told them the whole..."
"... Outside the Country - If you have been living abroad or come from abroad there may be nothing wrong with the way you ran your finances but the bank will want to check. In some countries this is a fast proceedure, in others it can take weeks to complete. Because a survey on the property you hope to buy is not booked until the credit check is completed the vendor can get the impression that nothing is happening and decide to look for another..."
"... with Loan Companies - These are not unusual and you may have gone to court and won the day. Many people do when the creditor puts unusual clauses in very small print within the contract. But to the lender you are now applying it means you may be trouble - rightly or wrongly - and they could take a negative view on your application for this reason..."
"... applied for credit - Every time you apply for credit your credit rating takes a hit, even if you ultimately don't take out the loan. The classic case is with store cards and goes a little like this. Mr X is out on a shopping spree and in several shops he is offered a discount on his purchases if he applies and pays for his purchase with the store's credit card. He has the money in the bank but he could make substantial savings so he takes the cards and pays them off within the month. But each card has represented an application for credit and so hit his rating. It will recover but if he applies for a mortgage in the near future he may be turned down as the lender is suspicous about the amount of credit he has been taking..."
"... can add on top of this, the totally unexpected - a mistake on your credit record. Even in a computerised world the opportunity for your name to be confused with someone else's, and someone else's debt mismanagement, is still a common occurance but you will remain blissfully unaware until it's too..."
"... if you have only arranged an Agreement in Principle there is still a great deal which could affect the bank's actual decision. The credit scoring they carry out may radically change what you can borrow. As such if you have found a really good loan or you expect to find a property quickly you should apply for the mortgage there and then even though you do not have a property in mind. Most financial advisers and lenders will try to resist this as it means more work without a full guarantee that they will get the business. Insist on it. This means you can be completely confident when you offer that you can afford it and the process will proceed smoothly and without..."
"... is offered by some financial advisers and allows you to be credit checked and ready to go without having to bully your bank to do it. The Sequence estate agency group are one such business that offer this service. The other advantage of a PAM is that because you have applied for the mortgage the interest rate and other features of that particular product are often held for up to three months, even if the lender removes that product from the market or increases their..."
"... rates! As a word of caution only apply for the mortgage or mortgages you would definitely go for as each lender will carry out a credit check on you. As mentioned earlier too many checks on your credit history makes lenders suspicious that you are trying to apply for too much debt. Finally..."
"... if the mortgage product that is right for you will take ten weeks to be issued there is a good chance the vendor will get bored, or suspicious, and go in search of another buyer who can get a loan faster. The vendor usually suspects there must be something wrong with the buyers credit if things are taking too long. From your perspective you loose the property, the survey fee, the arrangement fee, legal fees and..."
"... tempting. Summary - The last thing any buyer wants to do is spend time with financial advisers, finding out about their own credit record or poking around the internet for mortgage deals when they could be out looking at potential new homes - much more exciting. But this crucial step..."
"... this crucial step ensures you do not find a perfect home only to watch it disappear because of unexpected factors that could have been foreseen and resolved. While you are gathering together properties to view you should also be gathering together the documents you will need for a loan and ensuring there are no skeletons in your credit..."

Chapter 13: Your Own Homework
"... How to check your credit record before the bank does; How to find out if a property is in a flood zone; How to check if a property has planning permission (or if it needs..."
"... your property purchase is going to involve borrowing money it is worth checking your current credit ratings. Many people who have lead a prudent life are often surprised to find they have a very poor rating. Others are also taken aback when a mortgage is rejected because of some event in the past that has long been cleared up but the settlement was never properly passed on to the credit rating..."

"... you will need a mortgage to buy a property the lender will be able to supply you with an agreement in principle based on a few simple questions. They will generally want to know how much you earn every year and how much you pay in debts every month (say to credit cards or bank loans). They take one from the other and come up with a figure that they think you can afford to pay them every month. Calculating this backwards over the term of the mortgage (the time they will give you to pay it back, usually twenty-five years) gives the amount they are prepared to..."

"... a lender looks at you they are really looking at your earnings (that you can afford to pay the loan back on a month by month basis) and your credit history. Your credit history is a track record of previous debts. Every time you pay a credit card or loan on time you get points. The points go to make up your credit score. Every time you apply for credit such as a loan for a car, and every time you are late making a payment, you loose..."
"... system has some unwelcome side effects. If you apply for a few store cards in a month you may suddenly find it difficult to get a mortgage. This is because your credit history shows you are looking to borrow a lot of money and that might mean you are in financial difficulties. The result is that your credit score goes down and lenders don't want to go near..."
"... if you have not been in debt in the past you will also have a poor credit history and a low credit score. This is because there is no proof that you are any good at handling debt. It is the financial angels of life who have never had a credit card or taken a loan that can have the biggest problems securing a..."
"... important your credit score is also depends on how much of the property's value you want to borrow. This ratio is known to lenders as Loan To Value (LTV). As an example if the property is worth £100,000 and you want to borrow £95,000 your LTV is 95%. In the lenders eyes that's risky business. You are only putting in five percent and you want them to stump up the rest. In this situation you may have to provide much more proof of your financial stability than a buyer who is prepared to go halves with the..."
"... Really Means). If you are applying for a mortgage there is a great deal more to go wrong. You have a low credit score due to a lack of credit history or a default at some point in the past Although you are earning enough, you have other debts which result in the bank agreeing to lend..."
"... the lender needs (such as bank statements) which take time to request You have not been in the country long enough to have an adequate credit history (usually three years are required, but again it depends on your LTV) You do not have the right to remain in the country forever The surveyor..."

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