Credit files hit by banks' IT failure

Borrowers warned to make sure missing payments don't damage their debt record

Consumers are being urged to check their credit records or risk being rejected for a loan or mortgage as a result of the recent computer chaos at a host of British banks and Nationwide building society.

Hundreds of thousands saw their accounts plunged into the red and payments bounce at Royal Bank of Scotland, NatWest, Ulster Bank and Nationwide and fears are growing that some individual credit records could have been damaged as a result. Such was the size of the problem that RBS announced on Friday that it has put aside £125m to pay for the costs of the meltdown.

Leading credit reference agency Equifax told The Independent on Sunday that it could take as little as a week for a missed payment to damage an individual's credit record. However, some of the payment problems took longer to resolve. As a result account holders, through no fault of their own, could now have a damaged credit record which could lead to loan applications being refused or interest rates being more expensive.

"In the current environment, I cannot emphasise enough that banks want a totally unblemished credit reference. We have had clients refused mortgages and the reason given was a late payment even though they have never actually missed a payment," says Nigel Stockton, a director at mortgage broker Countrywide

A fortnight ago, duplicated payments were taken out of more than 700,000 Nationwide debit cardholders, which caused about 50,000 customers to fall into unauthorised overdrafts or suffer bounced payments.

And at the end of June up to eight million people at RBS/NatWest were left out of pocket after an IT glitch saw payments fail. Ulster bank customers were likewise affected but for longer.

But although the banks and Nationwide have said that individuals will not be left out of pocket as a result of their IT failings, such care doesn't seem to stretch to credit records with the onus on individuals to check they haven't got a black mark on their files.

This is an approach which has drawn fire from consumer champions including Richard Lloyd, the executive director at Which? "The banks must do everything in their power to make sure their customers who have been affected by recent IT glitches do not have their credit records damaged," he says.

In response, a Nationwide spokesperson said that in a "small number of cases", where it believes its customer records might be affected, it is "proactively working to correct any files to ensure that no record is left from this incident". And RBS/NatWest said it was "actively working with credit rating agencies to correct any impact" and offered to reimburse the cost of customers wishing to check their credit files.

But experts stress that the onus is on individuals to check their own credit reports. Usually, credit reports cost £2 or an annual subscription fee but affected customers can claim for the cost of a single credit check through their bank or building society before 31 October.

Once a missed payment is recorded on a credit record though, it can be time consuming and difficult to have it expunged. It is up to the firm which has lodged the missed payment on the individual's record to remove it. It has to be approached directly and the affected individual will be at the mercy of its accounts department as to whether or not a correction is made.

Consumers who are unable to get their records corrected can get the credit reference agency to put a notice on the file explaining the circumstances of the missed payment. But, lenders are not duty bound to take such notices into account and in the current harsh financial climate even the whiff of a missed payment or bad debt can lead to rejection.

Mr Stockton is urging consumers to be proactive, particularly as a failed loan or mortgage application is also recorded on an individual's credit file and in turn can lead to future rejections. As a result, unaware consumers could find themselves stuck in a vicious circle of credit rejection:

"If that original non-receipt of payment led them to a breach in the credit record, did the bank make good their credit reference? Have they checked to be sure? Do so now," Mr Stockton urged.

Credit reference agency Callcredit is telling consumers in the first instance "to monitor their credit report closely, particularly over the next three or four months". It is also "working closely with all of our data providers to make sure no one's credit report is unfairly affected".

Neil Munroe from Equifax is urging consumers to double check their bank statements and bills to ensure that any payment problems have been fully put right in a timely manner.

"Our advice is that if someone is concerned that a payment hasn't been received. First they should check any accounts to which payments should have been made to see if they have been received. If not, they should contact the lender to advise them of the reasons for delay," he added.

Repairing a damaged record

The payment problems have been resolved and most customers will be back in the financial position they were in before the IT chaos ensued.

Consumer groups, though, are urging people to check their statements closely and if they were affected to obtain a copy of their credit report. RBS has promised to refund the cost of a obtaining a credit report for its customers.

You can check your credit report for free at or pay £2 to a credit reference agency including Callcredit, Experian or Equifax.

Individual lenders have the ultimate decision as to whether to remove a late payment from someone's report caused by another company. If it refuses you can add a notice of correction to your report so anyone using your data in the future is aware of the circumstances.

If you don't get the help you expect you should follow your bank's formal complaints procedure. Failing this, you can escalate your complaint to the Financial Ombudsman Service.

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