A person’s credit file is a list of all types of credit that he or she has been given and the history of repayments made. The list includes bank overdrafts, loans, credit cards, mortgages and HP borrowings. If the person has been issued with a County Court Judgment, or has been made bankrupt, or has been in an IVA, or has had property repossessed, or has been subject to debt collection activities or has been involved in fraud, the credit file will record it.
Lenders can check an individual’s credit file when he or she applies for credit such as mobile phone contracts, credit cards, mortgages or property rental, HP, personal loans and overdrafts. Lenders can see the repayment history of previous loans and whether repayments were made on time. Defaults are recorded on the credit file of the individual.
Creditors use the services of credit reference agencies such as Experian, Equifax and Callcredit which keep and maintain records of the repayment performance of borrowers. The business of the credit reference agencies is to record such data on the credit files of borrowers and sell it to any interested party, provided they have a consumer credit license. Thus banks, mortgage providers, HP providers, credit card providers and even trading creditors can access your financial records in regard to borrowings. If you have a good credit history, then these records can facilitate your further borrowing at preferential rates. The converse is also true – a poor credit history will increase the cost of borrowing or even make it impossible. Access to and publication of such personal financial data relating to insolvent individuals is not prohibited by the Data Protection Act. For a small fee you or any private individual can obtain his or her own credit file and, in certain instances, a private individual can access the credit file of another individual such as when the two individuals concerned are co-habiting or even just living in the same house.
When you default in repaying any of your borrowings, creditors can create records of your failure. They do this by registering a default on the relevant account and provide the relevant information to the credit reference agencies. Even before you enter an IVA or a DMP or become bankrupt, some of your creditors may already have registered such a default where you have failed to comply with the terms and conditions of credit agreements, principally when you fail to make contractual repayments as they fall due. Such records are also accessible by the parties mentioned above.
In an IVA and in Bankruptcy, defaults remain on your credit file for six years from their date of registration. In a DMP they can remain on the file up to six years after the debt has been repaid in full. In an IVA of five years duration, borrowers can expect the default to be removed from their credit file about one year after completion of the IVA, assuming the defaults were registered around the time the IVA commenced. In Bankruptcy, the defaults will usually be removed about five years after discharge from bankruptcy which nowadays usually lasts one year. If in a DMP of say eight years duration, borrowers may have the defaults registered for a further six years.