Could you get cheaper loans under ‘significant’ FCA credit proposals?

Consumers could get better access to affordable credit and cheaper deals on loans under new proposals from the financial watchdog.

The Financial Conduct Authority (FCA) has launched a consultation that would require lenders to share customer credit information across a specific network of credit reference agencies (CRA).

A CRA, like Experian and Equifax, is a company that collects and holds data about you and your credit history which it shares with creditors and lenders.

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The city watchdog is consulting on formally appointing and establishing a network of “Designated Consumer Credit Reference Agencies” (DCCRAs). If a lender shares a consumer’s credit information with one of these DCCRAs it would have to share it with all of them.

The watchdog’s consultation runs until 1 May and is taking in views from consumer groups, CRAs and trade bodies.

Alison Walters, director of consumer finance at the FCA, said: “Access to affordable credit relies on good-quality data – it’s vital in helping consumers navigate their financial lives. That’s why we want to make sure everyone’s credit information is as full and accurate as possible.”

Find out how to boost your credit score in another of our pieces.

What does it mean for consumers?

The FCA said the change would lead to lenders receiving a more accurate picture of someone’s credit information and financial situation.

Rachel Springall, finance expert at financial data website Moneyfactscompare, said the proposals could be “significant”, particularly for low-income households.

“The suggestions may lead to fewer unfair rejections and more accurate data, which in turn, could improve the access to more affordable credit,” Springall added.

Springall explained that consumers can sometimes be turned down for credit due to an incomplete picture of their credit information, which can push them towards lenders offering more expensive short-term loans.

Meanwhile, Richard Pinch, senior director of risk in the banking and capital advisor division at financial services consultancy Broadstone, said the proposals could lead to cheaper deals for consumers.

“Borrowers could benefit from increased competition in retail lending markets which could feed through into increased choice and potentially more attractive pricing while strengthening safeguards against over-indebtedness,” he said.

How to check your credit report and score

Lenders and creditors look at your credit report when deciding whether to offer you credit like a loan, so it’s important it’s as strong as it can be.

A credit report is a history of your credit activity and accounts you hold, including whether you’ve kept up with previous payments. Banks, building societies, councils and courts provide the information to CRAs who then shape your credit report.

In the UK there are four main CRAs that compile credit reports: Experian, Equifax, TransUnion and Crediva.

Your credit score is a number that offers a general indication of how likely it is that organisations might offer credit to you, based on the information in your credit report.

You can check a credit report held by TransUnion, Equifax, Experian or Crediva for free by visiting each of their websites. Or you can order a paper copy by contacting the CRAs directly.

TransUnion, Equifax and Experian all have free to download apps which let you view your credit reports and credit scores as well.

Read another piece on how bank switching incentives can affect your credit score.