Free credit reports recommended

The major credit agencies, including Experian and Equifax are permitted to charge the public £2 to access their credit records, but the committee of MPs said that although the costs were not high, they do add up for regular searches given by credit agencies.

Given the key role credit reports play in enabling consumers to secure loans, the OFT are being urged to consider if there is a case for the credit agencies providing free access to their reports.

MPs also want the OFT to stop lenders putting black marks on credit records when consumers shop around for personal loans. This should be allowed and consumers should not be ´penalised´ for trying to find the best deal. Consumers often don´t know what the interest rate is of any particular loan before they apply for it, and every time they make an application, a mark is put on their credit record, even if they decide not to go ahead with the loan. This means that consumers who make more than one application for a loan are often refused credit which is deemed to be unfair.

It is also clear that many consumers don´t shop around because they fear that by doing so they will negatively affect their credit score. Multiple applications can lower a credit score and the Treasury Select Committee consider there are likely to be serious flaws in a market in which consumers are discouraged from shopping around, either because of unfounded fears or because of industry bias against multiple searches.

Lenders have told MPs that the credit marks are an essential tool to fight fraud but the report also said that there is a fine balance of public interest between ensuring fraud is prevented and consumers are protected from reckless lending, and ensuring that the market allows consumer choice.

Some lenders may welcome an easier regime for shopping around as, in the past, teams of students have been paid by lenders to make multiple applications for credit, just so that the lender can check the interest rates being charged by rivals.