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Credit Reference Agency (CRA): Why do credit card issuers use them?

Last Edit: 30/08/18

Credit Reference Agencies (CRAs) are an important part of the credit card industry: they help credit card issuers to verify a customers identity and will compile a profile of customers to pass onto credit card companies. This profile will then be used to decide whether a customer is suitable for a credit card and whether the application is fraudulent. Alongside credit card applications, credit reference agencies are used for: loans, mortgages, and mobile phone contracts. Credit Reference Agencies do not decide whether an individual should be accepted for credit (credit card), they simple help credit card issuers make an informed decision for credit card applications.

Credit Reference Agencies compile their profiles of consumers by using the electoral register and a number of other public sources. There is a limit to the information a CRA can compile about an individual. Credit Reference Agencies generally store the following information about applicants for credit: electoral register history; bankruptcies; court judgements; insolvencies; application for credit (past 1-2 years); repayment history; credit agreements (current and historical); and current credit balance.

Therefore, banks and credit card issuers will typically share borrowing history with credit reference agencies, and, therefore, if a consumer has defaulted on a repayment (loan/credit) -- and any proposals by the bank/credit card has failed to rectify the issue in 28 days -- then the bank/credit card issuer will usually register the default with credit reference agencies. If a consumer has had defaults, and these have been registered with credit reference agencies, then the consumer may find it hard to obtain further credit, and/or, successfully apply for a credit card. There are credit cards designed for consumers with a poor credit history, and it is possible to improve a credit profile over time: largely by repaying credit on time over time.

The three largest credit reference agencies in the UK are: TransUnion, Experian and Equifax. It is possible for consumers to read their credit report, websites like Noddle provide access to credit reports and scores, so that consumers can check their eligibility for a credit card or loan.