Credit rating system to be improved to better reflect people’s financial situation

Plans to improve the credit rating system in the UK have been announced by the financial regulator.

The current system

The Financial Conduct Authority (FCA) found that, although the current system is effective in some ways, there are a number of issues. These include:

• significant differences in the data held by the various credit reference agencies
• a lack of awareness among the general public on how to access and dispute the information held

What will change?

Under the new plans:

• lenders, and other companies regulated by the FCA, will have to share customer information with credit reference agencies (CRAs)
• a standard format for recording data will be introduced so that all CRAs present information in the same way
• it will be easier for people to record vulnerability information on their credit files and raise disputes when mistakes are made

Better lending decisions

Sheldon Mills from the FCA said the changes would result in better lending decisions.

He commented:

“Poor quality credit information can result in people being cut out of the credit market or taking on more debt than they can afford.”

He added:

“These improvements will help deliver more effective lending decisions, particularly for consumers with limited or poor credit records.”

Improving your credit score

A good credit score can give you access to a wider range of credit help you secure lending at more competitive rates. If yours could do with a bit of work, check out our guide on how to improve your credit score.