When personal loan, credit card, and mortgage lenders evaluate your risk as a customer, they rely heavily upon your credit score. Credit scoring systems vary by lender and consumers do not have a single score across all available lenders. Despite this, there are several factors that cause most lenders to reject credit applications. Even people who consider themselves responsible borrowers may find themselves rejected for credit for these reasons.
Many people who have never needed to use credit consider this a good thing. Unfortunately, it is not. Statistics reveal that more than ten million UK residents have insufficient credit history to qualify as responsible borrowers. Lenders provide credit scores to determine the likelihood of recouping the money they provide plus interest.
If a consumer has never borrowed money, the lender cannot determine if the individual is reliable and subsequently takes substantial risk. Develop credit history by getting a credit card, spending responsibly, and repaying the balance each month.
UK residents who are not registered to vote at their current address already have a negative mark as prospective borrowers. Credit reference agencies use the Electoral Roll to update their records each month. Individuals who are not listed on this register are considered less attractive credit recipients. Registering to vote through the electoral services department of the local Council will cause a quick increase in credit rating.
Even if your credit score was excellent, you may have unknowingly damaged it by making too many credit applications. Submitting multiple credit applications sends the message that you need money quickly because you are spending too much or need to repay existing debts.
Lenders view this as poor money management and are hesitant to offer additional credit. Wait six months from rejection of a credit application to submit additional applications. Close unused credit card accounts before applying for new ones.
Partners often have joint credit cards, bank accounts, or mortgages. If they split, they must separate their credit history. Otherwise, the pair will forever be financially linked and if one person is not reliable with credit or gets into debt, the other will suffer the consequences in terms of credit rating. The issue can be resolved by notifying the Callcredit, Equifax, or Experian credit reference agency that the partnership has ended and so should the credit history association.
Making credit card payments is only positive from a credit perspective when it occurs on time. Lenders do not look fondly upon credit card holders who make late payments because the situation requires additional effort and expense on their part. Establish automatic direct debts for credit card payments so payments will be submitted on time each month.
Unfortunately, identity fraud has become increasingly common within the UK. If someone is using your information fraudulently and you do not review your credit report regularly, the problem may go unnoticed until an application for new credit is rejected.
Review the credit report regularly to identify credit applications made in your name. If any of these are not correct, immediately notify the credit reference agency and the police.