Hundreds of thousands are people in the UK are regularly turned down for credit – be that a loan, a mortgage, a credit card or a mobile phone contract. There will have been individual circumstances for those rejections but there are a number of other reasons that credit is declined which are common to all lending decisions. You can identify these reasons when you apply for your credit file from one of the three main UK credit reference agencies – Experian, Equifax and CallCredit.
Your credit file is divided into four sections:
- the bits that confirm your identity
- your record of borrowing and paying back credit
- the public records that are held on you
- any credit searches that have been made when you have applied for borrowing.
So, here is what to look out for when you look at each of these four sections. First you can check that it is correct and, second, interpret whether this information is likely to help or hinder your ability to successfully apply for credit:
- Electoral roll. Are you registered to vote? If you are, is your address correct? One of the first things that lenders will look for is that you are in registered to vote at your current address. People who are not registered to vote are statistically more likely to have defaulted on debts and sometimes move about a lot in order to escape those debts.
- Your previous addresses. The credit report keeps track of your property history so that lenders can identify an individual correctly. If you have moved about a lot in the previous six years, these addresses will be shown on your credit record (assuming that you’ve been on the electoral roll during that time) and it may be more difficult to borrow.
- Your credit score. This is a figure between 200 and 900 indicating the risk that you represent to lenders. The lower the figure, the higher the risk. Adverse behaviour (being late with repayments, applying for lots of credit, carrying too much debt, etc) will all lower your credit score in short order. It is easier to damage your credit score than to repair it which takes longer and requires more discipline.
- Your borrowing history. Every time you make a repayment on a loan, credit card or other form of credit, it is recorded on your credit file. Also recorded is the date that you made that payment and whether it was on time or late. If it is late, this will have a direct effect on your credit score.
- County Court Judgements (CCJs). Unless you are made bankrupt, a CCJ is the worst mark against you if you are seeking to borrow money. A CCJ is the last resort of a lender struggling with a delinquent debtor and is made in civil court to enforce the repayment of the debt. It will remain on a person’s record for six years.
- Defaults. If you don’t make a repayment on time, you’ll probably have a few days to make good. But after that, your lender will probably give you a default notice which will set out exactly what you need to do to bring your account back in order. Defaults are registered on your credit record and are serious. Ignore them and legal action will follow.
- The amount of debt you’re carrying. The amount of debt you have compared with the amount of credit you have available is clearly shown on your credit record. If you have too much, then you’re credit score will suffer and you will find it harder to get more credit.
- Financial connections. Anybody you hold a joint financial product – such as a mortgage or joint account – will be listed on your credit report. While their credit history won’t be shown, a lender will automatically look at their file when you apply for credit.
- Fraud information. This relates to your identity whether it has ever been used in connection with a financial or insurance fraud. If you can see that there is a Cifas notification on your record, then you need to find out if somebody else has been using your details when applying for a financial product.
- Utility payments. Not all electricity, water and gas companies supply information to the credit reference agencies. But some do and if yours is one of them, then any late payments on your electricity bill might hinder your ability to get credit.
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