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
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.