Credit report data: don't take their word for it
The credibility of credit report data may not be as safe as you think
Since the last two big economic downturns in the UK (the industry-led
Thatcher recession of 1979/81 and the consumer-led exchange rate mechanism
recession of the early nineties) the stable, relatively calm economic waters
have been good to UK credit managers.
Due largely to the computerisation of bulk credit data in the nineties, the
barriers of entry into the credit information market have come down, and as a
result, credit managers have more choice of agencies at far lower prices.
Some agencies offer very low prices based on the regurgitation of public
record data from the Company Registration Office (CRO) with an appended credit
rating. And in the prevailing calm conditions in the last 15 years, whatever
agency was selected, the predictive qualities of credit reports were perceived
by the market as ‘much of a muchness’.
The predictive quality of credit reports didn’t even seem to be affected by
the deterioration in the quality of financials filed at Companies House.
As I write, 85% of accounts at CRO are abbreviated and unaudited. To make
matters worse, criminals have read the disclaimer on the CRO website saying that
accounts lodged there are received ‘in good faith’ and are not validated or
verified, and have bombarded Companies House with fictitious documents in order
to perpetrate frauds.
The new breed of credit manager has been brought up on this diet, and many
have no appreciation of what past generations of credit managers saw in their
credit reports, unless of course they continue to use the services of
traditional agencies such as Dun & Bradstreet, Graydon and Experian who
still add trade payment data, edit trade magazines, and interview companies to
add value to their products.
In turbulent times, a credit report must surely be more than a revamped
Companies House image document with an automatic rating attached? The low-cost,
no added value credit report has bloomed in ‘fairweather’ conditions over re
cent years, but will it do the job in bleaker conditions like the ones we are
facing now?
Martin Williams is managing director of Graydon UK