‘One gas bill cost me a house’: the price of confusion over your credit score

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‘The financial crisis cost me my house and I’m still paying for it’

Problems with a credit score can have severe consequences. James Whitby, 42, was rejected for a mortgage and missed out on the chance to buy his property when a mark on his credit report from many years back resurfaced.

Mr Whitby, a mechanic from Derbyshire, had lost a previous house

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and been declared bankrupt following the financial crisis. At that time he had also missed a British Gas energy bill and it was this that caused his later mortgage application for a housing association property to be rejected. As so much time had passed, British Gas agreed to remove the mark, but the removal was not properly processed. He said: “The credit reference agency wasn’t helpful at all in explaining what had caused me to be rejected. Eventually I worked out what it was and got in touch with British Gas.

“I had bought a house in 2005 and then after the financial crisis my overtime shifts stopped and I couldn’t keep up with the payments. The banks got bailed out by the Government but there wasn’t a bail-out for people like me – now here I am struggling to get a mortgage at 42.”

There was only a limited “window” for buying the property from the housing association so he now has to wait for another opportunity.

A British Gas spokesman said the mark had been “re-reported” because of a “processing error” and that the firm had apologised.

A spokesman for Equifax said consumers should approach the lender involved regarding mistakes on their credit report. She added: “You can also add a ‘notice of correction’ to explain any items on your report, such as missed payments, which may have occurred due to life changes such as losing your job.” In another case highlighting the difficulty of decoding a score, a Telegraph Money reader was rejected for a credit card with Barclaycard, despite his high credit score of 504 with Equifax but was subsequently accepted by Virgin Money.

The reader asked Barclaycard to explain but it said it was unable to discuss its acceptance criteria. After investigating his credit report on Clearscore, a service that allows you to view your score, he realised he was registered to an old address, meaning Barclaycard was likely to have rejected his application when it did not match the address he gave.

Clearscore and Barclaycard both use Equifax data. Virgin Money, the firm that accepted the reader for a card, uses Experian, which likely had an upto-date address.

Profiting from data

Credit reference agencies have access to huge amounts of personal information and even have an exemption from the GDPR laws introduced last year, which give individuals greater control over their data. While other firms are required to obtain consent for data collection, there is no such obligation on the credit bureaus.

The major credit bureaus will recommend loans and credit cards to users on the basis of their credit score and will often be paid commission by lenders.

Some of these tie-ups can be questionable. An email from Experian, seen by this newspaper, includes an offer of a “holiday loan” from a firm called Likely Loans with an interest rate of 59.84pc. The email points out that someone who borrowed £5,000 would pay back more than £9,500 over three years.

An Experian spokesman said its relationship with Likely Loans was similar to any other in the price comparison market and that the rate given was representative and could differ from what was actually paid. He added that Experian did not prioritise partners that paid commission.

The rate offered on a loan could fall by 2 percentage points on average when someone improves their score by just one credit score band, according to Experian. That means if you improve your score band from “poor” (561-720) to “fair” (721-880) you could save an average of £381 on a four-year loan of £6,000, as you would likely be paying a lower rate.