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The main reason why people get turned down for loans is because
they have a poor credit score. Your credit score takes into
account several factors, listed below. Different credit reference
agencies may weight these factors in different ways, however
these are the main items that are considered.
You will see from these that repairing your credit rating
is certainly achievable, but will take time - possibly one
or more years, depending on your current score and your personal
circumstances.
Generally speaking, you will not be able to find out your
credit score, nor will you be entitled to find out why an application
for credit has been refused. However, you are entitled to see
the information held in your credit file, which is the information
used to calculate your credit score. If you can prove that
the information held is incorrect, then you can request it
to be changed. Details of your rights under the Consumer Credit
Act 1974 and the Data Protection Act 1998 will be sent to you
when you apply for a copy of the information held by the credit
reference agency.
Different lenders will evaluate your credit score in different
ways, depending on the purpose of your credit application.
They may also take into account additional information that
they have about you. If your credit score is low, you may qualify
for a "bad credit loan" with a higher interest
rate than would be offered to someone with a good credit score.
There are three credit reference agencies and they may be
contacted as follows:
Your credit history
Your personal credit history will include a record of missed
or late payments, as well as Bankruptcies and County Court
Judgements (CCJ's). These will stay on your file for a number
of years. You can improve your credit history by starting
to make your payments on time, and the old records will gradually
have less impact on your credit score. Missing a single payment
will not normally count against you, but missing three or
more consecutive payments is often penalised substantially.
You should note that having existing loans or credit should
not be a problem, provided that your credit file shows that
the debt has been well managed. In fact, a history of managing
loans well may count in your favour.
Time spent at your current address
This will be a factor if you have been living at your current
address for less than three years. If you own your own home,
this will be less important. The people most likely to be
affected by this factor are tenants who have held multiple
addresses within the past three years.
New bank account
If your bank account is new or if you have no bank account,
then your credit score will be marked lower.
Lack of stable employment
If you have held more than two jobs in the past three years,
then your credit score may be affected. It may also be lower
if you have just recently changed jobs. If you were unemployed
for periods of several months between jobs that will also
be taken into account. Lenders prefer to lend to people in
continuous stable employment.
Multiple credit applications
Every time a lender or potential lender applies to view your
credit file, this will be recorded in the file. If you have
recently applied for several loans or credit facilities within
a short period of time this may count against you. The rationale
behind this is that it may indicate a desperation to obtain
credit.
The Electoral Register
If you are not on the Electoral Register, this will be recorded
and may count against you.
Other people living at your address
Many lenders will consider the credit files of other people
living at your address. They may take the view that these
people are likely to be closely connected with you. This
can sometimes be a problem for tenants, and if you think
that a previous tenant's bad credit history may be affecting
your own, you should ask to see a copy of the credit file
relating to your postal address.
You may also be linked to other people if you hold a joint
bank account, or if you have previously made a credit application
jointly with another person, whether successful or not. |
