Banks and other financial institutions have never lent money no questions asked. Since the concept of credit began, they have always asked some sort of questions to make sure that the person who is being lent the money can afford to pay it back, and more importantly, will pay it back. We are all used to the credit checks which are run when we apply for a new loan, and many will have seen the adverts on television or online showing how easy it is to check your credit score using an app. What is less understood is the parallel process of fraud checking, which aims to help banks identify fraudulent applications.
CIFAS
The Credit Industry Fraud Avoidance System, or CIFAS, was established in the 1980s and helps financial services organisations share information about people who have tried to make fraudulent applications for credit, or who have been caught involved in something like insurance fraud. They also hold information about people working in financial services businesses who have been found guilty of fraud in the past.
Identity Fraud
One of the main roles of CIFAS is to protect the banks and building societies against identity fraud. If a criminal can get enough details about you, including your name, date of birth, address and other key details, that might be enough for them to take out a mobile phone contract, loan or order goods on credit. The fraudster then disappears, leaving you with the debt for an agreement you never signed up to.
Identity fraud can have a serious effect on your credit score, especially if you are not in the habit of checking it regularly. Every time you – or someone pretending to be you – makes an application for credit, then this is recorded on your file. Lots of applications in a short period will negatively affect your credit score. If the fraudster is successful in taking out credit under your name and then fails to pay, then this will damage your credit score even further.
CIFAS and Fraudulent Applications
CIFAS is an industry body and aims to protect the banks and building societies rather than the individual. They look for patterns in applications to try to spot potential fraud, which is then flagged up for further checks. They are understandably cagey about how they go about this, in order not to give clues to the fraudsters about how to evade the system. CIFAS also hold information about convictions, bankruptcies and people who have had insurance policies cancelled which lenders can access.
Protecting Yourself Against Identity Fraud
Apart from being aware of not sharing personal details such as your date of birth online, one of the best things you can do to protect yourself against identity fraud is to keep an eye on your credit score. The main credit reference agencies – Experian, Equifax and TransUnion – all have websites and apps to help you do this. You don’t need to be checking your credit score obsessively every hour; once a week or so is probably enough. If you spot any unusual activity on your credit record then take action right away.
First, tell your bank or other lenders about transactions or accounts which you don’t recognise. If you do see on your credit record that someone has been making applications for accounts in your name, report it to the police and get a crime number. Then contact CIFAS and ask for protective registration. This will put a big red flag against your name in the database, forcing banks and other lenders to go through an extra layer of checking to make sure it’s really you who is applying for a new credit card, not the fraudsters.