Guide to Refused Credit

Why have I been refused credit?

Before offering you credit, a lender needs to determine whether you are likely to repay the debt. To do this, most lenders use 'credit reference agencies' to build up a picture of your credit history i.e. to see how you have dealt with current or past commitments. Credit reference agencies such as Experian and Equifax hold factual information about you and this allows a lender to check your name & address and your past credit history, including any County Court Judgements or defaults recorded against you. Our guide to Refused Credit can be found at www.only-mortgages.co.uk

There are many different reasons why a person is refused credit. It can take just one of those reasons or a combination of many for a lender to decline an application. There is no automatic right to credit, although it is illegal to refuse credit for reasons such as race, gender, religion, sexual orientation or address. It may simply be that you do not fit the profile of the type of borrower the lender wants to offer credit to, perhaps because of your age, residential status or length of time in employment. It may also be because information held about you by a credit reference agency, or information provided in your application form, indicates that you will have problems repaying.

How does credit referencing and credit scoring work?

In some cases, lenders decline applications for credit as the information obtained from the credit reference agency indicates that a person is not a suitable risk. If a lender has declined your application on this basis they will inform you of the name and address of the agency used. This allows you to obtain a copy of your credit report.

It is common for lenders to 'score' applications by giving different areas of your application marks and the adding up the total. This method allows them to determine whether you fit the broad category of borrower they are looking for. Failure to meet the points requirement results in your application being declined, although typically the lender will inform you if this is the reason you have been refused credit.

How do I take control of my credit history?

Your credit history is a valuable asset because it allows you to take advantage of the competition between lenders - meaning you can shop around for the best rates or terms on the market. Each different lender takes a number of different factors into consideration when deciding to offer a customer a credit facility such as a loan, a credit card or a hire purchase agreement. There are some common factors that influence the final decision and some general guidelines are outlined below:

• Ensure your name is recorded on the electoral roll at your present address. Each time you move house ensure you update the electoral roll with your new address.
• Check your credit report to ensure that it accurately reflects the dates you resided at your previous addresses.
• Check there are no addresses on your credit report to which you have had no connection.
• Settle any County Court Judgements and apply for a certificate of satisfaction from the County Court.
• Bring any arrears up to date where possible. Request that the company concerned updates the information held with the credit reference agencies.
• Avoid multiple applications for credit within a short period of time. Comparing the best products on the market will not result in credit searches being registered against your name, however as soon as you submit an application to a lender a search will be registered as part of the application process.
• If there is financial information on your credit report linked to other people's names and you have no financial connection with those people you can ask the credit reference agency to remove the information from your report. This is useful where the information held could affect your own credit worthiness.
• If you have fallen into arrears due to circumstances beyond your control you can add a 200 word Notice of Correction to your credit file. This is an explanatory statement that will be seen by all lenders you apply to in the future.
• If you do have difficulty making your repayments you should seek advice from your lender immediately. The earlier you contact them, the more sympathetic they are likely to be. If you have been refused credit or need advice with debt, give our financial helpdesk a call on 0870 443 8481. Lines are open 24 hours a day. Alternatively, advice is available from your local Citizen's Advice Bureau, the National Debtline or the Consumer Credit Counselling Service (CCCS).

What happens next?

If you have been refused credit don't panic - there are lenders out there who may be prepared to offer you credit. By using and repaying a loan or credit card responsibly you can help to rebuild your credit rating. If you can show prospective lenders that you are less likely to default on your agreement and more likely to repay the debt, your application will have more chance of being accepted. It is advisable to seek the advice of a reputable firm and to be wary of high charges being made by companies offering credit.