How up-to-date is credit file data held by mortgage lenders?

espressoaddict

Hi All,

First time poster here but long time lurker!  Would appreciate any help with the following question, which has no doubt been asked in a similar way before - however this time may be slightly different.

Short back-story - I had a £91 default incorrectly registered with the three recognised CRAs by BT.  Took ages for them to remove it from Experian and Equifax and even longer for Transunion to remove it.  Either way, the latter did finally get this done 2.5 weeks ago and they made the change themselves and I could see it the next day.  I'm in the process of applying for a mortgage, so have waited for the default to be removed before applying.  When I look at my credit file "live" with any of the three CRAs, the default is definitely gone so it's not a case of waiting for my various lenders to submit their latest files over to be refreshed.  I'm confident anyone checking my record would also see this, however....

A prospective lender (Nationwide in this case) initially told my broker that banks don't actually see the current CRA position when they perform their initial credit check on you and that instead they take a periodical data feed from the CRAs once every 4-8 weeks.  Rightly or wrongly this felt wrong to me (based on other questions asked and answered here before) so I phoned up the mortgage helplines of both Nationwide and Barclays who both told me this was incorrect and that they really were able to see whatever was being reported for a person on any given day they receive an application.

I went back to my broker and told them what I'd found and I asked they re-check with their contact at Nationwide.  Unfortunately the answer was the same as the initial one - that they only take data from Equifax, Experian & Transunion once every 4-8 weeks and that therefore they may have picked a data point prior to the default being removed which would leave me needing to wait to apply.  I was/am still a bit disbelieving and remarked that the banks can't possibly know who out of 10s of millions of people in this country might apply to them for a mortgage and that therefore they must extract data for every single potential applicant.  My broker said "yes - that's exactly what they do - they hold the data for every individual in the country who has a credit record".  This seems massively inefficient as (a) the size of the data extract must be enormous and (b) it's not really up-to-date, which you'd think a massive financial institution would want it to be.  It presumably also a huge data protection risk because they'll be holding data on millions of people who will never apply to them.  Why not just wait to see who applies and do a live search just on them?  But what do I know....

My question for anyone who knows more about this kind of stuff is - which is correct?  My issue is that my file has been "publicly" clear since the 21st November but now I face waiting until either 21st December (4 weeks - if I want to chance it) or 21st January (8 weeks) to apply and be safe that the bank can see it.  I'm up against a short timeline, so am keen to progress ASAP.

Any thoughts/advice would be much appreciated - thanks in advance.

CliveOfIndia

I may be wrong, but I suspect it may be a soft search vs a hard search.  A soft search is often done by lenders to give an indication of whether or not you may be accepted, but doesn't return a full dataset.  When you actually make a formal application, they will perform a hard search which will give them access to full and up-to-date data.

espressoaddict said:

I was/am still a bit disbelieving and remarked that the banks can't possibly know who out of 10s of millions of people in this country might apply to them for a mortgage and that therefore they must extract data for every single potential applicant.  My broker said "yes - that's exactly what they do - they hold the data for every individual in the country who has a credit record".

I don't think that's correct - after all, that's exactly why the CRAs exist, they do the donkey-work of storing everyone's data, then sell it to a lender as and when needed.

voluted

CliveOfIndia said:

I may be wrong, but I suspect it may be a soft search vs a hard search.  A soft search is often done by lenders to give an indication of whether or not you may be accepted, but doesn't return a full dataset.  When you actually make a formal application, they will perform a hard search which will give them access to full and up-to-date data.

espressoaddict said:

I was/am still a bit disbelieving and remarked that the banks can't possibly know who out of 10s of millions of people in this country might apply to them for a mortgage and that therefore they must extract data for every single potential applicant.  My broker said "yes - that's exactly what they do - they hold the data for every individual in the country who has a credit record".

I don't think that's correct - after all, that's exactly why the CRAs exist, they do the donkey-work of storing everyone's data, then sell it to a lender as and when needed.

Yeah, I would imagine so. They will do a soft search to generate an Agrement In Principle with the hard searches coming later when you do a full application.

The problem I suppose is going to be that even if your broker can request they perform a hard search for the AIP, that'll leave you with a hard search if they end up turning you down.

As regards to the banks holding all this info, they don't. They will perform a soft search with the CRA who will give them the data from a given point in time. I don't know if that is rolling or say performed once a month and passed to whoever requests it but either way, the bank won't be holding (stale) copies of the CRA reports for every person in the country.

it's not really up-to-date, which you'd think a massive financial institution would want it to be.  It presumably also a huge data protection risk because they'll be holding data on millions of people who will never apply to them.  Why not just wait to see who applies and do a live search just on them?  But what do I know....

It's an indicative search. For the vast majority of people, it will give the bank a decent indication of their creditworthiness without being exhaustive. Obviously, for a small number of people who have just dumped negative data off their live file, it's not ideal but I don't think the number of people in that group is large enough to warrant the alternative.  Checking a live file costs considerably more to the bank than the slightly stale copy from a soft check. Given the small numbers that will end up in the no-mans land where their live file is fine but their soft file isn't, it makes little financial sense for the banks to stump up for full credit checks for every application, and it would also mean that everyone applying for an AIP gets a hard search on their file which is less than ideal.

Hoenir

CRA's hold the data base. Finance companies interogate it as required. Alternatively add a flag to be notified of material changes. Every inquiry costs them money. 

espressoaddict

Thanks all.  The scenario whereby the soft search accesses a potentially "stale" copy of the credit report held by a CRA makes sense (prior to a full search if the AIP is given).  I have just spoken to Transunion who say that even a soft search with them by a mortgage lender would result in the current data being provided, as opposed to it being slightly old.  

Appreciate your responses.

Brokenknee

A point of clarification - a hard/soft search both return the same complete information, it's just the footprint of the search that differs. 

A soft search undertaken by a lender will be accurate as to the live data held by the CRA, it won't be "stale", as per TU's comment. 

A lender may well screen their entire (or subset of) current customer base against the CRAs for a monthly update, but this would be done for the purpose of managing their credit exposure and providing a better understanding as to what's happening with current customers (should they offer you a new card/reduce your limits etc based on what your other commitments look like). 

The lender will not have a copy of the UK market, just their own customers. 

CliveOfIndia

Brokenknee said:

A point of clarification - a hard/soft search both return the same complete information

I'm afraid that's incorrect - a soft search does not return all of a customer's data: https://www.experian.co.uk/consumer/guides/searches-and-credit-checks.html

That's one reason why you may find you're told you have a good chance of acceptance when you do an eligibility check, but then declined when a hard search is performed.  By its very nature, a soft search does not give a lender access to all of your data.

Brokenknee

CliveOfIndia said:

Brokenknee said:

A point of clarification - a hard/soft search both return the same complete information

I'm afraid that's incorrect - a soft search does not return all of a customer's data:  

That's one reason why you may find you're told you have a good chance of acceptance when you do an eligibility check, but then declined when a hard search is performed.  By its very nature, a soft search does not give a lender access to all of your data.

Please read the bit about the difference - it's solely the footprint left/visibility of the search to other lenders. 

I worked for one of the CRA's for a number of years in the past. It's the same information returned. 

That article is misleading and doesn't help demystify things in the way it should. 

CliveOfIndia

Brokenknee said:

CliveOfIndia said:

Brokenknee said:

A point of clarification - a hard/soft search both return the same complete information

I'm afraid that's incorrect - a soft search does not return all of a customer's data:  

That's one reason why you may find you're told you have a good chance of acceptance when you do an eligibility check, but then declined when a hard search is performed.  By its very nature, a soft search does not give a lender access to all of your data.

Please read the bit about the difference - it's solely the footprint left/visibility of the search to other lenders.

Do you mean the bit that says:

"A soft credit check is an initial look at certain information on your credit report. Companies perform soft searches to decide how successful your application would be without conducting a full examination of your credit history."

(My bolding to highlight the relevant information)

Yes, you're absolutely correct that a soft search doesn't leave a record that's visible to other lenders, whereas a hard search does.  But it's only a hard search that returns a complete dataset to the lender.