Understanding Credit Reference Agencies and Your Credit Score

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Understanding Credit Reference Agencies and Your Credit Score

If you have registered with a credit reference agency, you may be looking through the list of recommendations they give to improve your credit score and wonder if they are in your best interest.

The truth is credit reference agencies are private profit driven companies and you should be wary of some recommendations they make. In this guide we outline how credit reference agencies work, how they make money and how you can use this information to improve your credit profile.

Lets explore credit reference agencies and improving your credit score further.

What is a Credit Reference Agency?

In the UK there are four credit reference agencies.

  • Experian,
  • Equifax,
  • TransUnion,
  • Crediva.

The first three are the major credit reference agencies and Crediva is a smaller agency that operates differently. For this article, we will be looking at the major three because most financial institutions use them to calculate your credit profile.

A credit reference agency compiles as much financial information about you as possible and then allocates a score to reflect how much risk you are to a lender.


If the risk of lending to you is high, your credit score will be low. If you are financially responsible you will be a lower risk to banks and creditors and your credit score will be higher.

How Do Credit Reference Agencies Make Money?

Alongside providing your credit score to you and financial institutions, credit reference agencies are private companies with shareholders and profit margins.

Credit reference agencies make money in several ways:

  • Charging monthly subscription fees to use the service,
  • Recommending financial products and receiving a commission from lenders,
  • Advertising.

When you consider that taking additional financial products may be detrimental to your credit score, it can seem unethical credit reference agencies take commissions from financial companies for selling you loans etc.

Credit reference agencies are authorised and regulated by the Financial Conduct Authority (FCA) and must adhere to strict guidelines around recommending and advertising financial products.

Are All Recommendations Beneficial for My Credit Score?

This regulation does not always prevent credit reference agencies from acting in a questionable manner.


For example, a common tactic credit reference agencies use to secure more commission is by recommending you extend your credit limit to improve your credit score.

This meets the FCA guidelines as the statement is technically true and the higher credit limit you have available will improve your credit profile.

In practice though, it is less clear because extending your credit limit can lead to overextending yourself financially and you may take on additional borrowing you cannot afford to repay.

Improve Your Credit Limit without Borrowing More

Credit reference agencies advertise credit cards and other financial products to extend your credit limit. 

If you have no existing credit limit, it can be beneficial to borrow and build a track record for your credit score.

If you have existing credit limits in place, it is more beneficial to clear these down by repaying the debt and maintaining your existing credit limit.

For example, if you have an existing £2000 credit limit and you are using £1800 of it, it is best to repay the £1800 and have the existing £2000 than take additional borrowing.

This will also improve your credit score more than extending your credit limit as the repaid debt has a bigger positive impact than borrowing more.

Sensible Money Management Always Trumps Credit Reference Agency Recommendations

In general, a credit reference agency is more inclined to advertise financial products that could negatively impact your credit score over time because they make profit by doing so.

Ultimately, you are one of millions of customers and a credit reference agency will not be concerned about impacting your personal credit score. Their primary concern is maximising profit from each of their customers.

Can You Complain About Credit Reference Agencies?

Yes, because credit reference agencies are regulated by the FCA you have a complaint process you can follow if you feel an action taken by the credit reference agency has negatively impacted you.

In the first instance you should contact the credit reference agency and make the complaint directly to them. They will investigate your complaint and issue a final decision.

If you are unsatisfied with this final decision the credit reference agency is obligated to provide you with information to escalate the complaint to the Financial Ombudsman Service (FOS).

What Kind of Complaint Is Upheld?

When discussing advertising and marketing of financial products, you may mistakenly believe any debt you take on that negatively impacts your credit score will be a successful complaint.

In truth, if you decide to take a financial product on the recommendation of the credit reference agency you will have little recourse if things go wrong unless:

  • The credit reference agency recommended a product unsuitable for your financial situation and were aware you would struggle to repay the debt.
  • The credit reference agency recommended a product that did not adhere to lending standards outlined by the FCA.

Using Knowledge About Credit Reference Agencies to Improve Your Credit Score

Whenever you receive a recommendation from a credit reference agency to improve your credit score you should act with caution.

The key question to ask yourself is – will the credit reference agency make money from this recommendation?

In some cases, credit reference agencies make recommendations that do not generate them profit such as encouraging you to register to vote.

If a specific product is advertised such as a credit card with a high chance of approval, the likelihood is the credit reference agency is making a commission if you take them up on their offer.

Bear in mind, most credit reference agencies will be keen to help you improve your credit score as the higher the score, the more financial products they can advertise to you. If your credit score is low, you will find a lot of the advice is geared toward you improving your score as much as possible for this reason.

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