Credit Referencing is a practice whereby a financial institution refers to credit referencing agencies to help them assess the risk of lending to specific borrowers.
The aim is to help reduce the risk of lending and fraud by looking at historical information held in individual credit files.
This information can be of three types:
- Information on public records, such as electoral records to verify names and addresses, court judgements, bankruptcies, and various agreements with creditors.
- Credit account information – lenders share information about borrowers – to see if payments have been kept up to date, if they have loans outstanding with other institutions, and if those payments are up to date.
- Search information – the file carries records of credit checks by lenders and numbers of applications over short periods which could count against applicants.