THA LIFESTYLE
| BUSINESS & FINANCE
M
any people wonder what the
so called “Credit Rating” is and
why it is so important. In
many ways we all depend
on external financial sources
like a mortgage, car loan
or even a personal loan.
People get their loans
approved based on their
“Credit Score”.
So who gives us this score and
how do they calculate someone’s
score?
Well, it’s a long and complicated
process but let’s look at it step by
step.
Who is giving these scores?
There are a few firms called
“Credit Referencing Agencies”.
The UK’s major credit referencing
agencies are Equifax, Experian and
Call-Credit. Their job is to collect
almost every adult’s financial data
in this country. They are regulated
by Data Protection Act 1998.
Page 4
CREDIT
HOW DO THEY
Parthy Nithian
BA(Hons), ACMA, CGMA
Investment Accountant
How are they giving the score?
IIt’s like a jigsaw puzzle where they
try to create a picture of you by
collecting a small amount of data.
These include simple information
Again based on the information
collected, credit referencing
agencies assess the risks. If you
have not paid some bills on time
and missed some credit card
payments, you will be seen as
high risk and eventually get a
lower score. As you might expect,
people with lower credit scores
will most likely be rejected even
like paying bills on time, how many
times you have missed a payment
dead line, how much you owe the
credit card companies etc. Apart
from financial data the agencies
also collect your electoral register
records such as how many years
you have been living in one address
and if you are continuously
registered in the electoral register
etc.
for a mobile phone contract. Vice
versa, a person with a higher score
will more easily get higher levels
of credit like mortgages and car
loans. Although it sounds very
straight forward credit referencing
agencies use highly complicated
computer generated models
to produce one’s credit score
and they periodically review the
activities and revise the scores.
How are they collecting
someone’s financial data?