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Have you been declined for credit and you have no idea why? Well read on to get a better idea as to what the problem could be.
When you make an application for credit, the lender will approach a Credit Reference Agency (CRA) to see all of the information that they hold in your name. This will help them to make their decision.
There are three CRA’s in the UK at present, Experian, Equifax and Call Credit. They hold a record of how you’re paying your accounts such as your mortgage, loans and credit cards allowing the CRA to act almost like a library of information.
You don’t have to have any bad or adverse information recorded in your name to be refused credit. Lenders can pick and choose who they want to lend to, and this they will do.
The credit market is quite unstable at the moment, and lenders can’t keep on giving out credit willy nilly as they have done in the past, as the money quite frankly isn’t there anymore.
This means that they have been tightening their belts and the number of people they accept will be less. The acceptance criteria is being made tighter.
By acceptance criteria, we mean that lenders will already have an idea of the type of person that they wish to lend to. They’ll decide exactly who they will be lending to before you even put pen to paper and if you don’t meet the criteria they’ve already pre-set, yes, you’ve guessed it - the computer will say no.
We don’t know what the exact criteria of a lender is, but common sense and experience of working in the financial industry for many years tells you that lenders look at the following factors when you make an application:
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- Lenders like to see a history of how you’ve previously paid your credit agreements. They like to see that payments have been made on time. They don’t mind a few one off late payments, but any more than this and you’re reducing your chances.
Lenders are less likely to lend to people who have are Bankrupt or have unpaid County Court Judgments (CCJ’s) as this looks like you’re having serious financial difficulties.
- Most lenders like to see stability. They don’t like see that you have been moving house too often and they prefer you to be employed full time with a salary and with the same bank for quite a while - the longer amount of time the better.
- Lenders like to see that you haven’t already got too much credit, because they don’t want to over-commit you financially as there will be less chance that you’ll be able to pay them back their money.
- Other factors such as your salary and if you are a home owner also play a part in the lenders decision.
If you have been declined for credit, the first thing you should do is to get your free credit report to see exactly what has been recorded in your name.
Make sure all of the information is correct, if it isn’t, get in touch with the company who has recorded the data and ask that it is put right.
Before you make another application for credit, be sure to follow our article, “How to improve your credit report“.
The easiest way you can get a free Experian credit report online is to sign up for a free 30-day trial with Credit Expert.
Remember that Credit Expert membership costs you absolutely nothing for the first 30 days whether you decide to remain a member or not.
Click here to see your FREE credit report |
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