What can stop me getting credit?
Getting turned down for a loan, credit card or mortgage can be devastating, but it is made even worse if you have no idea why you have been unsuccessful in your application. Below are the five most common reasons for rejection, and what you can do to avoid them in order to get the credit you need.
I have a poor credit history: You may be rejected if you have debts, have made late payments or have court judgments, even if there were special circumstances to explain why. To lenders, these factors are all indicators that you could be overstretched and may not be able to repay a new loan. What should I do? If you check your credit report before you make an application, you can be sure that all the information is up to date, and may also be able to add notes explaining individual circumstances – i.e. you were ill which resulted in a late payment, but this hasn’t happened before or since.
- My partner has had financial problems: Anybody with whom you share financial responsibility i.e. a joint account, mortgage or credit card, will appear on your credit report. This is known as a financial association. You may not know if he or she has had any problems but a lender will check. What should I do? If you think this could be triggering rejections, it makes sense to get your financial associate to check his or her credit report too, and, if necessary, set the record straight. If you no longer part of a previous financial unit or no longer share a joint financial agreement, make sure your report is updated, because your financial independence may help you get the deal you want.
- I’ve been a credit "tart": When applying for any kind of credit – not just cards, but also mortgages and loans – you should always specify that all you want is a quotation, not to make a full application, because if you have applied for dozens of loans and credit cards in an attempt to find the best loan it will show up on your report and lenders may thinking this means you are overstretching yourself are desperate for money or even that a fraud is being planned. What should I do? When you check your credit report, make sure that application searches have not been made in error. If they have, contact all the lenders concerned and ask them to change the record to show that you were merely asking for a quotation.
- I'm not registered to vote at my current address: Lenders use the electoral roll to help check that you are who you say you are and live where you say you live. They also look for stability – that you’ve lived at the same address for some years. If you fail to register to vote, they cannot verify your identity and may ask for additional identification, suspect a fraud, or even turn you down flat. What should I do? Check that your report show you are eligible to vote at your current address – if it doesn’t, contact your local authority for a rolling registration form, which will enable you to register at your current address and de-register from any old ones.
- The lender has given me a low credit score: Lenders use your credit report and the information included on your application form to generate a credit score, which indicates the risk involved in granting you credit. Every lender uses a slightly different formula that represents its own and industry experience, often looking at how good other customers with similar circumstances have been at making their repayments. Your credit score will change over time, as the information in your credit report and on each credit application form is updated. What should I do? To get an idea of how lenders are likely to regard your application, you can get a free credit report. Your score will be a number between 0 and 1,000. Generally, the higher your score, the easier you will find it to get credit. If you are not scoring as well as you would like, there are things you can do that may help you to improve your score and your access to better credit in the future.
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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.