When you apply for credit, such as a credit card or a loan, the lender will ask a credit reference agency for your credit history. They have so much information that we don't really need to fill out that long application form. They can get all the information they need from Experian, Equifax, or Callcredit, the three main credit reference agencies, in a fraction of a second. You would be very surprised by how much they know...
When you apply for credit, such as a credit card or a loan, the lender will ask a credit reference agency for your credit history. They have so much information that we don't really need to fill out that long application form. They can get all the information they need from Experian, Equifax, or Callcredit, the three main credit reference agencies, in a fraction of a second. You'd be shocked to find out how much they know about you.
The credit agencies have been getting information about your financial transactions from banks, building societies, and other places that give credit. Every time you try to get a credit card or miss a mortgage payment, it shows up on your record. They know if you pay the minimum or the full balance each month, and they also know how much credit you have on each card. They also look at public records, like the list of voters and the public register of court actions, where all county court judgments are listed. All of this happens automatically, and when your credit history is asked for, the computer will do a statistical analysis of your money habits and make a decision about whether or not you are a good fit. The industry says that it helps lenders make a good decision about whether or not to lend you money.
But credit agencies are not allowed to look at information about student loans. Even though the industry complained to the government, nothing changed, and they still can't get to the information. What's up? Student loans are a debt to taxpayers because they were not paid for by businesses.
Before September 1998, this is how the student loan system worked: once a graduate got a job and made the national average, which was GBP15,000 at the time, they had to pay back their loan by direct debit every month. 59,000 of these graduates from before 1998 haven't started paying back their loans yet, and each of them owes an average of GBP2,750.
The way student loans work changed in September 1998, and they still work the same way today. Now, repayments are taken straight out of the paycheck, just like national insurance and income tax. This method has worked out much better.
The lending industry doesn't like how things are going with student loans. Their main complaint is that they need to know if a person applying for credit has other financial obligations. When top-up fees were added, student debts got bigger, and loans taken out after 1998 have to be paid back at a rate of 9 percent of a graduate's income once it reaches GBP15,000. This is a big chunk of money to lose.
"It is helpful to know if a young person has a student loan and if it is being paid back," said the Association Consumer Credit Counselling Service. That means they agree with the lenders.
The Citizens Advice Bureau also wants the information to be made public. They think that graduates might be taking on too much debt, and if lenders could see their student loans, they would make sure that graduates can't borrow more than they can afford.
But the Department for Education and Skills isn't changing its mind about keeping people's debts to the Student Loan Company secret.
For the near future, things will stay the same, and the credit industry won't be able to get information about student loans.
