A flawed credit report meant we lost our dream home

Published 07th Dec 2009

Lenders taken to task for relying on flawed credit records


Missed out: investment banker Yonas Alemu and wife Magda were turned down for a mortgage when a credit reference agency supplied disputed information to their lender


Banks and building societies are cutting rates to meet lending targets before the end of the year, but borrowers continue to miss out on the deals because of flawed data from credit reference agencies.

Borrowers with good credit histories are having their mortgage applications declined or delayed because of mistakes on credit files, with banks accused of “laziness” for merely relying on data from the agencies.

Complaints about agencies have risen during the credit crunch, according to the Information Commissioner’s Office, which adjudicates on disputes.

Brokers said that they tended to see a rise in the number of applications turned down due to credit scoring after a spate of market-leading deals from lenders.

Royal Bank of Scotland said recently it will be unable to fulfil a £16 billion lending commitment to small businesses and is now striving to meet its £9 billion pledge on residential mortgage lending. It cut rates last month and now offers the best-buy two-year tracker at 2.99% for those with a 20% deposit. In a note to mortgage brokers, RBS urged them to snap up its deals while they are available.

Woolwich cut fees on its fixes from £499 to £199 last week. “This is to ensure that we create extra momentum in December in anticipation of large volumes of remortgage maturities in January,” it said.

Abbey and Alliance & Leicester — both owned by Spain’s Santander — also cut rates across their ranges by up to 0.20 percentage points last week. Abbey offers the best fix for those with a 30% deposit at 3.59% with a £995 fee.

However, Money has been inundated by letters from readers struggling to get mortgages because of credit file mistakes.

Yonas Alemu (pictured above), 42, an investment banker from Lewisham, southeast London, was turned down for a mortgage by Abbey and missed out on buying his dream home because of a black mark on his credit file from Nationwide building society.

Although Experian, the credit reference agency, can repair mistakes within 24 hours of receiving a notice from a bank or building society, Nationwide was under no legal obligation to fix the problem promptly.

Ian Gray of Largemortgageloans, a broker, said: “Lenders say they want to lend and Abbey, for example, is offering better and better rates, but their own credit scoring process, which apparently relies almost entirely on credit reference agencies, is letting them down.”

Ratings agencies are obliged to respond to initial queries from consumers within 28 days but this could be merely a holding letter stating the agency is looking into the matter.

Alemu was in the process of buying a home in Purley, Surrey, after his son was accepted into grammar school, when Abbey declined the mortgage on the basis of an adverse credit rating. He said: “As neither I nor my wife have ever had any history of bad credit this was a shock to us, and we instantly thought of fraud.”

However, his Experian credit file showed a missed payment recorded by Nationwide, his mortgage lender, which Alemu claimed was a mistake.

Nationwide refused to act quickly to send him a notice of explanation, saying only that the problem would be resolved within 30 days. As a result, the family lost the property.

Alemu said: “You can imagine the unbearable frustration this caused us. I accept that administrative errors will always happen. My main issue is the way Nationwide responded to it. They didn’t seem to care or understand the impact this rating downgrade has on the life of individuals.”

Nationwide said: “We apologise to the customer for the frustration he experienced and will be contacting him personally to apologise. We normally make changes quickly.”

The case adds to growing concern about over-reliance on credit reference agencies, which charge a £6.99 fee to consumers who want to keep up to date with their credit history.

Banks and building societies supply the information given to the agencies under data sharing agreements.

Consumers who do not sign up to an agency are not alerted when information is supplied that lowers their credit score.

Experian said it is not responsible for the accuracy of information supplied by banks and building societies — and has no obligation to ensure inaccuracies are corrected within a set time. “We would hope lenders would want to ensure that the information was correct and do so within a reasonable time frame,” it said.

However, the agencies are set to come under pressure to impose tougher standards on the information they keep following a Treasury committee inquiry into the industry. A report is to be published this month or early next year.

John Mann, Labour MP and a member of the committee, said: “This is likely to be only the first stage of our investigation. We have seen real laziness by the banks in merely relying on these external agencies when making decisions that affect people’s lives.

“The general view among MPs is that there needs to be proper systems in place that empower consumers — better regulation of credit reference agencies to ensure the buck isn’t passed between banks and the agency to the detriment of consumers.”

Northern Rock offered market-leading rates in recent months, but brokers reported that more than half the cases they submitted to the lender had been turned down.

Check list

- You can order a copy of your credit file from the two main agencies — Equifax (0844 335 0550 or equifax.co.uk) and Experian (0844 481 8000 or experian.co.uk).

- Websites also offer free trials that allow you to see your rating for 30 days. At the end of the period you will be charged £6.99 a month by direct debit.

Source: ' Times '

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