When you apply for a mortgage, loan, or other form of credit these days, the lending industry will look at your credit history. In practise, you don't have to say much because the lender's computers can pull up your credit file in a fraction of a second. Experian, Callcredit, and Equifax are the big three credit agencies. And you'd be surprised at how much they know about your money.
Credit agencies have been getting information about you from banks, building societies, and other lenders for a long time. They know about all the credit applications you've made, the times you were late or didn't pay a loan, mortgage, or credit card bill, the balances on your loans and credit cards, and whether you pay off more than the minimum each month. They even know your credit limits. The agencies also got a lot of other information about you from public records, the voters' roll, and the public register of court actions, where all county court judgments are written down. Then, their computers look at all of this information from a statistical point of view to judge your application. So, in this situation, the credit industry says that the more information they have about you, the better they can decide whether or not to lend you money.
But there is one important piece of information that is missing. Despite what people have told the government, credit agencies do not get information about student loans and how they have been paid back. The information is turned down because student loans are a debt to taxpayers and not a business.
Before September 1998, graduates paid back their student loans through direct debits, like mortgage payments, once they started making more than GBP15,000. But it is thought that more than 59,000 graduates from before 1998 are behind on their payments by an average of about GBP2,750 per graduate.
The way student loans were paid back changed after September 1998. Repayments, as well as national insurance and income tax, are now taken straight out of paychecks by employers. This method is much better and eliminates the chance of bad debts.
The credit industry says it needs information about student loans because they can put a lot of stress on graduates' finances. This is especially true now that top-up fees have been added, making the average student loan much bigger. The graduates have to pay back these loans at a rate of 9% of their income over GBP15,000, which can be a big chunk of their monthly income.
So, the credit industry says that it needs information about student loans to get a full picture of graduates' financial situations. The Association Consumer Credit Counseling Service agrees. "It's helpful to know if a young person has a student loan and if it's being paid back," said a spokesperson.
Even though it is being pushed to share its information, the Department for Education and Skills is still refusing to let the Student Loan Company share information with the business world.
Even the Citizens Advice Bureau wants this decision to be changed, saying that lenders need information on student loans to make sure that graduates don't take on so much debt that they can't pay it back.
But, at least for now, the situation stays the same. The credit industry can't find out what happened with student loans in the past.
