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Last updated on 15th of June 2022

How Credit Reference Agencies Work

When you apply for credit – whether it’s a loan, credit card, or mortgage - credit reference agencies and the lenders offering you credit work together to gather important information about you.
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What is a Credit Reference Agency?

Credit reference agencies (CRAs) are companies that collect information about you from public and private sources. They use this to create a profile that’s used for credit applications, background checks, and other kinds of transactions. They provide financial institutions with access to this information, so they can make informed lending decisions. 

In the UK, the main agencies are Experian, TransUnion and Equifax.

Here are some of the things credit reference agencies do:

  • Collecting and storing credit information and other relevant data on individuals

  • Using this information to help customers as well as lenders

  • Ensuring that data is up to date, accurate and protected against fraud

Here are some things credit reference agencies don’t do:

  • Make lending decisions (approving or refusing credit)

  • Record whether credit applications were successful or not

  • Record why an applicant was refused credit

  • Hold a blacklist of people or properties

  • Hold information about a person’s religion, race, medical history or political beliefs

Credit scores vs credit reports

It’s important to note that credit reports are not the same as credit scores. Credit scores are calculated by a third party based on a variety of factors, including payment history and debt owed. 

A person's credit score may be different from one credit reference agency to another due to differences in how each of them calculates the score.

You can get your credit report from the main credit reference agencies (e.g. Experian or Equifax) and this allows you to see whether your information is up to date and accurate. You can also dispute any incorrect information - which is essential if you want to maintain a good credit history.

How credit reference agencies work

Credit reference agencies use sophisticated algorithms to create a profile based on all these factors. This is what allows them to assess your creditworthiness as well as provide insight into other characteristics like your health and financial status.

Credit reference agencies don't just focus on financial information. They will also pull in data from public records, court records and even social media.

Credit reference agencies supply the company with information about you that they can use to decide whether or not to offer you credit. These companies often work with lenders and retailers to provide a credit check. That typically includes your credit score, which is an important factor in approving your credit application. 

Types of credit reference agencies

Consumer reporting agencies

Also referred to as credit bureaus or credit reference agencies, consumer reporting agencies are businesses that collect and maintain information about consumers’ credit histories or other aspects of their personal finances. These agencies sell this information to other companies, such as lenders or insurance providers, who use it to evaluate potential customers.

Financial reporting agencies

Financial reporting agencies are companies that provide financial information to other companies. They do this by providing financial statements, reports and other forms of data.

Financial reporting agencies are the backbone of the finance industry. They provide a lot of important information to businesses and investors on a daily basis. They also help to monitor compliance with federal regulations and international standards.

What information do credit reference agencies hold?

Credit reference agencies work with credit providers to get information about your financial status. This includes how you manage your current account, what type of borrowing and repayments you have made in the past, court judgments against you, or if any insurance has been cancelled due to non-payment. 

The most important part of this process is that it not only affects your credit score but also the way you are treated when applying for future credit deals – meaning a company may offer you a better deal if they think your history indicates that you can be trusted to pay back the money on time.

What can lenders and other companies see on my credit report?

Your credit report includes personal information, like your name, address, gender and birth date. It also includes details about your finances, such as your payment history and the type of credit you apply for (e.g. a loan). Credit reference agencies won’t share any personal information with a company before they get permission from you to do so. However, they will share this information with the company offering credit when they process your application. 

Lenders and other companies can see: 

  • Your repayment history

  • Any defaults on loans or credit cards

  • Details of any fines or legal judgements against you

  • Credit limit

  • The type of credit you want (e.g. a loan)

  • Whether the credit reference agency has seen any late payments in the last six months

How credit reference agencies can help you

Credit reference agencies help you by confirming your identity and making sure you are who you say you are. They can also tell a lender if they will approve or reject your credit application. 

A credit reference agency is a company that provides information on the level of risk associated with giving someone credit. When you apply for credit – such as a credit card, loan or mortgage – credit reference agencies and the company offering credit join forces to gather important information about you. This can help you get the credit deals you want.