Lenders lift family credit bans

Bad debts of other family members should not affect you

Applications for loans will no longer be blocked by poor credit histories of family members under an agreement struck with major UK lenders.

From the start of November, most UK lenders have agreed not to use third party information when assessing loans.

Many lenders' decisions have been influenced by credit records of family members living at the same address. Also, applicants can currently view information about their family members when they obtain their own credit file.

The practice has continued because lenders have had a grace period from the provision within the Data Protection Act, which bans sharing of such personal data.

The Information Commissioner - who overseas the implementation of the Data Protection Act - said he would get tough with any firms that do not adjust to the new rules.

"Any companies in the credit industry still without a firm timetable for implementing the new requirements should reflect very carefully on their position," Richard Thomas said.

"I have little sympathy for stragglers."

Companies that break the Data Protection Act can face unlimited fines through a criminal action and £5,000 through a civil case.

'Third' parties

Most lenders currently assume there is a financial connection simply on the basis of a shared surname and address.

The firm deadline is great news and should be welcomed by both consumers and lenders Jill Stevens, Experian

They will verify someone's application by postcode, and where that includes names that are the same or similar, details are included in the report.

This has been widely criticised by people who believe credit details should be private and the actions of one family member should not bar another.

From November, parents and children will no longer be automatically assumed to be financially connected.

In addition, when customers request a copy of their credit file, the process will be amended so that an individual will only see their own credit data and not that of any financially connected "third party".

Individuals will also be able to opt out of the automatic use of their financial partner's data enabling them to be assessed in their own right.

Experian, one of the UK's three credit reference agencies, welcomed the announcement.

"The firm deadline is great news and should be welcomed by both consumers and lenders," said Jill Stevens, director of consumer relations at Experian.