This Mistake Could Cost You Thousands

By Donna Werbner | 29 April 2008

Fans of Sesame Street's Big Bird will know: Everyone makes mistakes.

Of course, it's all very well for a man in a giant yellow chicken outfit to preach: "Don't get mad and don't get sad... mistakes are not so bad".

But if it's your bank which has made the mistake - and that mistake has a detrimental impact on your credit rating - it could cost you thousands of pounds.

This is because, as I explained in The Secret Way That Bank Keep Tabs On You, banks regularly share information about you and your credit record behind your back.

And following the credit crunch, the Fool has learned that some mortgage lenders and credit card providers are rejecting applications for credit because the applicant has a single black mark on their credit record.

So a single mistake by the bank (which may have occurred for a number of innocent reasons: because you were a victim of identity fraud, or an application was accidentally submitted twice) could potentially harm your ability to get a mortgage or any other form of credit at a low, ‘prime' rate in the future.

And this could cost you more than you think. Most sub-prime mortgage rates are around 2% higher than the cheapest rates for 'prime' borrowers with spotless credit records. Now, 2% might not seem a lot, but when you're borrowing large amounts, it can really add up. For example, if you borrowed the average Fool mortgage of £150,000 at a sub-prime rate instead of a prime rate, it would cost you an extra £2,200 a year.

And the worst part is, most lenders won't tell you their reasons for turning you down (as I recently found myself, when my application for a credit card was rejected).

That means a mistake could be sitting there on your file, right now, just waiting to cause havoc the next time you apply for credit.

Scary thought, isn't it?

Check Your Credit Report

In this uncertain economic environment, when a spotless credit rating is so important, it is a really good idea to check your credit report just to make sure everything is as it should be.

You could either buy a report from Equifax Credit Rating for £14.95, or you can sign up for a 30-free trial with Experian through The Motley Fool (this will allow you to access your report for free - but if you don't want to pay a monthly subscription charge, remember to cancel before the 30-day trial is over).

Correct Your Credit Report

If you do find there is a mistake on your report, there are a number of ways you can correct the error:

You can complain to your lender. Every lender should have a complaints procedure in place that will allow you to do this. Once you have done this, you will then have recourse to the Financial Ombudsman Service if it isn't sorted out. However, you have to wait until the bank has sent you a letter with its final response to your complaint, or 8 weeks have passed with no response.

You can contact a credit reference agency and ask them to contact the bank on your behalf and query the mistake.

You can add a 200-word statement to the credit report and explain the truth. This is called a ‘Notice of Correction'. You will need to contact a credit reference agency with the statement and ask them to put it in your report. This should cause any application you make to be referred by an automated computer check and passed on to a real live human being, who should be more sympathetic than a machine!

Best of all, you can do all of the above simultaneously if you want to.

In other words, if you see a mistake, don't let them get away with it! Get mad - and get it corrected!

More: How To Improve Your Credit Rating.

> Sign up for a 30-day free trial with Experian through The Fool.

Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool.

At 21:02 on April 29 2008, INAIR said:

So it continue's.

The main lenders for just about everything in this commercial world ( the banks ), have screwed up massively from irresponsible lending and securitization buy's, out of pure greed and share holder satisfaction.

Due dilegence?, I don't think so!.

OF course there are many more issues and finer points to discuss about this, ( un-ending apparently ), but the main issue is that THEY have screwed up, and we as the average worker are paying for these abysimal decisions by banks and instituions.

Now they come begging for money, from the government and shareholders, and still want US to pay more for a mortgage or loan.

Shame, and more shame on these forever greedy institutions.

I like to call it BIGSTROP:

Banks & Insurance Grieveance's Stealth Taxe's & Rip Of Price's.

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At 06:29 on April 30 2008, Dhahran2001 said:

The aberrant apostrophe lives in Grieveeance's (sic), Taxe's and Price's.

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At 06:56 on April 30 2008, terentius41 said:

This type of thing can happen extremely easily. I have held a John Lewis account card for decades. About 18 months ago John Lewis asked me if i would like to change my card for one of their then new credit cards. I applied on line and received a refusal within the hour. I challenged the refusal and spoke to the girl who had taken the decision. She said that she had checked with Equifax and didn't like my credit record. I also checked with Equifax. My credit score was and still is 999 (Yes 999!) and I have never once ever defaulted on any account or a single payment. Her reason for the refusal: She didn't like the fact that I 'played' my credit cards and had paid loans off early etc. She refused to listen to reason and I simply 'walked away' from the situation without any ill effects to my credit rating. Some months later I was approached again by John Lewis to make the change and I more or less said you have got to be joking and declined. I was asked why, I explained and was informed that a number of account customers had received the same treatment. Clearly the girl concerned was not fit for her job, but may have caused others a great deal of credit difficulty due to her lack of judgement, though fortunately not in my case. I don't know, but would hope that the young twerp concerned was at least removed from the job, if not sacked. The caveat here is that you do have to keep a close eye on your own credit record and know exactly what is recorded about you. Also, be aware that the decisions taken are not always wrong because they are automated, but can be down to unfit employees taking decisions on you.

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At 08:23 on April 30 2008, Bullcote said:

This happended to me 3 years ago. I had an argument with a new bank over their charges. They stopped answering letters and I stopped paying money into the account. A year later I applied to convert 3 of my credit cards that I had had for several years to loans with each bank or credit card company. All turned me down and 1 called me a fraudster because it looked like I had applied and been turned down 3 times. It took me 12 months using Data Protection and consumer legislation to discover the first bank had blacklisted me whilst not replying to my letters.
We went to court 18 months ago since when the bank have used several tricks to delay matters. They accept I do not owe £1100 they claimed but that they owe me £700. However, they won't settle because they know I will take them to the cleaners once they admit their mistake or the judge rules in my favour.

I have posted notices of correction but frankly, although lenders are supposed to look at these, they don't take them into account. They just look at the numerical credit score and accept or reject on that basis, even if you have been a long standing customer of the lender.

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At 08:50 on April 30 2008, sstudent said:

I have followed all the advice on repairing my credit. I checked my record, arranged a settlement for an outstanding debt. Placed a notice of correction on the debt & had the record showing clearly I had settled the account. Despit this I too have been turned down for few things. I'm not put out by them as they were not important but I feel I have wasted my time in some ways as nothing seems to have improved!

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At 09:03 on April 30 2008, stokoe206 said:

my bank cancelled the wrong direct debit some years ago which meant I defaulted on one installment of a loan payment this has proved impossible to repair

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At 09:03 on April 30 2008, whiteburn said:

I object to paying £15 to see information that someone has collected about me, accurate or otherwise.
As I know my own credit history, this information is for them to make money from and for the benefit of others, banks etc and not for my benefit.
I should have free access at all times and if the information is incorrect not only should it be corrected but I should be recompensed for my time, inconvenience and any financial over charging that results from their inaccuracies.
It feels that I am being asked to do the equivalent of paying my employer for the privilege of employing me.
Will anything change...you bet it wont.

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At 09:21 on April 30 2008, nix1 said:

Hi

as terentius41 has pointed out, the people making the decisions are not always properly trained. As a result even the notice of correction is enough to stop some companies from granting credit.

Badly trained or lazy staff will assume that a note on the file = credit problem and don't even bother to look to check what the note was about as sstudent has found.

So yes, by all means complain and ensure that errors are flagged, but be aware that the flag could cause problems in and of itself.

IMHO, this will continue to be the case until the decison-makers are made more accountable, they should have to explain exactly what it was in the credit record that made them turn the application down. Should it emerge that the decision was made because somebody hadn't understood that a notice of correction is not an indicator of a bad credit record, then the decision should be reversed.

Nor should people be punished for the Foolish practice of paying loans off early and looking around for the best credit card deals, but that's another issue!

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At 09:25 on April 30 2008, Sammie37 said:

Hi All
With regard to the Credit Report etc., is there not an Ombudsman for this anywhere that you can report/go to? To complain to or ask why? It just seems ridiculous that an employed person can be so flippant and take it upon themselves to "judge" whether they think you "deserve" credit or not (ie John Lewis girl)evenif you know you have never "damaged your credit history".
There seems to be no "come back" yet again for poor advice, judgement etc on 1. the individual who has caused such absolute grief to a potential customer and 2. no come back on the actual company concerned who employed the individual, just a weak "Oh sorry" is not good enough. Meanwhile, unbeknown to the individual their credit rating has just taken a dive. After all it is not as if you get the credit for nothing. The business/financial world in this country seems to be extremely fast at smearing the name of good people, without all the facts, but extremely (and painfully) slow at admitting their mistakes and helping to exonerate those people. There seems to be a "could care less" attitude, unless of course, it is highlighted by the press and TV and then, and only then, does the company concerned become all caring and SO surprised that this has happend etc, etc.

Be nice to know that someone of higher authority was looking into the ways Credit Reports are kept,and used - that's all.
Have let of steam here and no I am not a financial boff, I wish I was, just a working person looking to sort out my own finances as well.
Have a good day all!
Bestest
Sammie37

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At 09:35 on April 30 2008, drsusanna said:

I do so agree with Sammie37: I lost a really good mortgage deal (and, therefore, accumulated £thousands) because I was supposed to have a poor credit history. It took me weeks to contact every account I had and get each to write to the effect, that I had never defaulted. I still have no idea how I got a bad credit mark. It's ok now - too little too late - and, as you say, there is no redress, no compensation, no-one to complain to.

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At 09:51 on April 30 2008, AAA105 said:

VERY, VERY disappointing to see these advertising puffs for the credit recording companies.

Just send £2 (each) to Equifax, Experian and Callcredit, and they will send you a printout of what thay have on you (and a record of anyone they consider to be financially associated with you.

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At 09:52 on April 30 2008, JERSEYLIL said:

I so agree with Whiteburn that it is grossly unfair that one should have to pay to see this information, but I would go further and make it compulsory for any agency which disseminates information about you should have to make you aware of that information so you have the opportunity of defending yourself. It is incredible that one should have to discover a bad credit rating by chance and then pay to find out why. Consumer protection is pretty comprehensive generally and this seems like a glaring omission on the part of the government.

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At 09:56 on April 30 2008, murtibing said:

I have previously been advised never to add a notice of correction EVER. Once such a notice is on record a lender cannot process your application for credit automatically. Delays occur while you wait for manual checking and, as a general rule, NoC's seem to count against you because the lender cannot be sure who is telling the truth.
I believe this to be the case, but as I don't work in the industry I cannot confirm it; can anyone else give us the beef on this point?

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At 10:06 on April 30 2008, PeterJ42 said:

I have similar problems. Abbey took money on a DD on the wrong day and then charged me a bounce fee as funds weren't available. I told them this was unacceptable and to close the account. Since then they have tried to charge me over £600 and won't even let the case go to court claiming that it is part of the fees argument (which it isn't. Meanwhile my credit rating is stuffed because of their error.

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At 10:19 on April 30 2008, laalaa41 said:

When I tried to change the dates on direct debits to match my pay date, most service providers managed to do it but 2 didn't despite being given 6 weeks to affect the change. One finally found reference to the request, the other never did - both argued with me because they "had no record" trusting their computerised systems before me. People forget that data is only as accurate as the humans who feed it in!

Its been nearly four months and I'm still working to clean up my credit report. As there was a snowball effect to the debacle, there are now several organisations affected so its a major undertaking. The energy I have to expend is exhausting and I often wonder what an elderly person would do and how constant phone calls accusing you of all sorts would affect a little old lady. I don't expect things to change any time soon.

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At 10:23 on April 30 2008, ColinCamper said:

What a sorry bunch of people and a sorry bunch of tales. Pretty much par for the course for the U.K. of today.

'Britons never will be slaves'
Except to the Global Banking industry!

Hahahahahahaha!

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At 10:47 on April 30 2008, niceyl said:

I am really disapponted to see that Motley Fool seems to helping Credit agencies to make money. If you are checking your credit rating, the cheapest way is get a £2 statutory report. Just go the various company's websites.

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At 10:53 on April 30 2008, hungary said:

I had my credit report from equifax very recently, to understadn why for the first time ever I had been refused a loan. There were 17 mistakes on it! Including non-existing names, addresses, wrong electoral roll details and loans that were unknown to me. They are refusing to rectify it, stating that the companies who put the information on are responsible for rectifying it. In the mean time my credit rating is gone. I'll try Donna's suggestions. Does anyone else have experience with NoC's?

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At 11:16 on April 30 2008, apro100 said:

I know the energy industry is not always a good example, but when a supplier objects to you switching supplier (e.g if you have an outstanding debt or try to leave before the end of a fixed term contract), it is required to tell you why it has objected. Maybe the same rules should apply to credit applications.

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At 11:29 on April 30 2008, Irwin77 said:

As mentioned, credit reference agencies provide a service to banks and the likes, and that's who they should be charging!

Credit reports don't provide the full picture and as such can not be accurately used for making decisions. They only list the 'black marks'.

I spent my early 20's getting into debt, and my late 20's paying it off! I defaulted on an RBS loan in 2002. Seeing as no further interest was being added to this loan, it made economic sense to pay off my other loans first. It also took me 9 stressful months to get RBS to admit they had 'misplaced' 850GBP of payments made by me!

In the last 5 years I've paid off almost 30k of debt. I have 9k outstanding with RBS. I want to move house and my monthly mortgage budget is less than a third of my net income, yet my 'black mark' will now override my new found responsible attitude to borrowing!

It's all very one sided - banks and businesses are allowed to pass judgment onto individuals without warning, 'guilty until you've spent enough of your time and money proving otherwise'!!

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At 12:00 on April 30 2008, JCofMargate said:

I tried the Credit Expert monthly reports (offered on this site) and found them unintelligible. Then they stated sending me regular emails telling me something had changed on my report, but when I went to look nothing was flagged up and nothing appeared to be out of the ordinary. I soon stopped letting them have my money.

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At 12:41 on April 30 2008, bob13south said:

Hi Donna
I'm puzzled re these credit ratings. Can you tell me (or direct me to an explanation) how agencies can know one's credit history? Do all businesses that one deals with, be it purchases, holding personal accounts and credit cards, send this info and all financial transactions to a central repository? And what checks and balances are in force, ie the legal situation, and who monitors the system, ie ensuring fairness and dealing with disputes?
Ta in advance,
bob13south

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At 12:56 on April 30 2008, Silveraven said:

Like others above I too am disappointed with Motley Fool for colluding with Experian and Equifax on 30-day free trial or £14.95 over-priced deals.
I tried the Experiean deal a few months ago and not only did they **** up such that the 30-day period kept running out, when I finally got the report it contained pages of pointless information and didn't even include details of my main credit card accounts!
At this point only was it pointed out that the 3 companies (Experian, Equifax and CallCredit) don't actually share data with each other and I was told I'd have to contact the other two myself! What an utterly crap service for something that one shouldn't be charged for in the first place! It's about time that the industry got this sorted and I urge Motley Fool to spearhead such a campaign rather than sitting back and making a cut out of recommending these charlatans!

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At 14:38 on April 30 2008, JamesJP said:

To correct a few mistakes above... Credit reports are just the shared data that lenders use to help assess credit risk. When you apply for credit, lenders carry out the assessment not the credit reference agencies. The credit report data comes from public records and from the lenders themselves - when you take out credit, you give the lender permission to share details about how you manage your account with other lenders through the credit reference agencies. This helps promote responsible lending. The vast majority of lenders now share full credit account data, not just account defaults, where they have permission. There are about 40 million accounts that can't currently be shared as they were opened before lenders routinely obtained consent to share full data. This is something currently being looked at by a working party set up by government. As businesses that process personal data, the Information Commissioner's Office (which ensures compliance with the Data Protection Act) keeps a close eye on the credit reference agencies. Complaints about credit reference agencies can also be referred to the Financial Ombudsman Service, if the CRA is unable to resolve it through regular complaints resolution. Embrace your credit report – don’t sneer at it! Lenders are looking at it ever closer and more often, not just to assess new customers but also to look after existing customers. Many people check their report on a regular basis to give themselves the best chance of getting credit and at the best rates. You can get a paper copy of your report for £2 which lists all the information a lender could see in your name, but more and more people are checking their reports online because it’s quicker and more convenient and because the additional features these services offer – such as text or e-mail alerts when something changes – can be incredibly useful. You can try the Experian service free for 30 days when you sign up for a trial.

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At 16:05 on April 30 2008, Ofolaller said:

I have heard it said (I think by a panellist on a BBC money programme) that a person's credit rating IS REDUCED A BIT every time the credit bureau is asked for a credit check on that person. That is, a person's credit-worthiness diminishes simply by dint of being looked at.

I know this sounds bizarre to the point of incredibility, and yet in this semi-secret world of credit commodification I am quite ready to believe this, knowing how credit bureaux behave in other matters.

Can a knowledgeable person please confirm or unequivocally refute this preposterous notion?

And also whether, as murtibing suggests above, notices of correction count per se against you, irrespective of other considerations.

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At 17:19 on April 30 2008, bob13south said:

Thanks JamesJP - good explanation. Re Ofalaller, my daughter recently consulted a good financial advisor who asked her if she knew her credit rating. She's just started as a teacher and has been visiting banks & building societies recently to check out first time mortgages and one of these did a check on her visit. The reason the FA mentioned it was because he didn't want to do another check himself as too many checks reduced the ratings! If possible, I will try to find out if he knows why.

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At 19:18 on April 30 2008, HenryScottTuke said:

Due to the volatile stockmarket, I transferred money out of my brokerage account and into high paying building society accounts. One notified me that an 'alert' is on my record. I've got my credit report and the only reason for an 'alert' is perhaps that another Bank did an identity check before they let me open an account. This seems ridiculous if this 'alert' affects your credit rating. Perceived wisdom is not to hold more than £35,000 in any one institution, but going on this recent experience, it will still cost you in a less than perfect credit score.

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At 08:53 on May 01 2008, cvw20 said:

I'm not a legal expert, but if an organisation makes an allegation against an individual that could be percieved as defamatory, then that individual would be entitled to claim damages in a court of law. Now I don't know the contents of my own credit report, but I would definitely pursue the authors for damages if the report contained even a single error, and insist it is withdrawn in its entirety. I imagine that the damages sought could be rather high, given the sensitivity of the information contained in these reports. Such actions might put more onus on the authors to ensure their information is correct.

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At 16:14 on May 01 2008, ewangee said:

Ofalaller, it does seem to be true. My Experian rating dropped from 987 to 931 from one day to the next. The only thing that had changed on my credit report was a credit search that had been made for a personal loan. I'd like to get a loan for some home improvements and to consolidate some CC debts, but I don't dare because another search will appear and my rating will go down yet further.

What's more, don't assume that your creditworthiness will be rated in the same way by the different credit ref. agencies. although my Experian rating is ok, my credit rating is shot on Equifax because I missed four CC payments in 2006 as I hadn't set up a direct debit when I thought I had. When I got my Equifax report, it had the equivalent of DANGER DANGER written all over it because of this 1.5-year-old error. In light of the dramatic way this information is displayed on the Equifax report, I'm not entirely surprised the lender refused me, even though I've plenty of good credit and a spotless history of repayment with other lenders.

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At 23:34 on May 01 2008, castath said:

I have always considered Credit Reference Agencies as being scum.

I was a victim many years ago to the lies they tell and its almost impossible to resolve any issues.

cvm20, defamation law does exist but the difficult part would be proving actual loss as you can only sue for what you have lost and you would have to get the company refusing your credit to say that they refused you credit due to the specifics in your credit report. Not going to happen since one feeds the other.

Because Credit Reference Agencies are not accountable, have no vested interests in resolving issues and pay no compensation, while happy to extort money out of you for an inaccurate credit report is why they are uncontrollable scum. The sad bit is that we accept it.

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At 19:14 on May 03 2008, Sparkkle100 said:

It is quite impressive how us humans' have devised so many ways of getting us to part with money - for nothing in return. The day I apply for a credit/store card/personal loan ever again will be a very black one for me!

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