It can be a real pain when you make an unsuccessful credit application, especially when you can’t see why you were refused.
“But I’ve got a good credit score!”, “But I pay all my bills on time!”, “But I don’t even have a credit card!”, people may say.
When you apply for a credit card, a loan or even a mobile phone contract, it’s up to the lender to decide whether or not to lend to you – and they have varying methods to work out if you’re a risk worth taking.
New research from Experian* has found that 86% of Brits think that lenders should share information on the reasons why they have been refused credit. If you’ve been turned down, only the lender can tell you why because only they know. If you ask, they should be able to give you the main reason.
Does being refused credit affect your credit score?
Experian’s research also found that 75% of the population think that being refused credit affects your credit score.
Being refused for credit is not, in itself, hazardous for your credit score. While your credit report will show that you applied for a credit card – it stays on for a year - it won’t actually show whether or not you were accepted.
However, credit refusal can often lead to more attempts to get credit – and making a lot of applications in a short space of time could have a serious impact on your credit score, and your ability to get credit in the future.
That’s one reason why Experian have partnered with Credit Strategy for 2017 Credit Awareness Week, in which the aim is to empower people to improve their financial future.
Some common reasons to be refused credit:
- You’ve missed or made late credit payments recently, which show up on your credit report
- You’ve had a default or a CCJ in the past six years, which will show up on your credit report
- You’ve made too many credit applications in a short space of time in the past six months
- There are mistakes such as incorrect addresses or other errors on your application form
- You may not fall into the target bracket for the type of credit you’ve applied for
Did you know that 61% of homeowners have never checked their credit report? Your credit report is a summary of credit accounts you’ve had in the past six years – and that can include not only credit cards, loans and mortgages but also overdrafts, mobile phone contracts and certain utilities such as gas, electricity and water.
Lenders use it to take note of your repayment records and how well you’re coping with your finances, and use it, along with the info on your application form and info they might already have if you’re an existing customer, to help them make their lending decision.
In our survey, only 56% identified the lender as the one who makes the final decision for a credit card, with loan (61%) and mortgage (67%) not far ahead.
Interestingly, 76% said they would like to see more information on what they can do in the future to ensure they don’t get refused credit again. Understanding how your credit report works could help you understand the reasons why you may have been refused credit – and help you manage your finances better in the future.
Understanding your credit score
We also found that the young don’t check their credit score. 85% of Brits aged 18-24 don’t know what their current credit score is, and almost three-quarters (73%) have never checked their credit score.
Your Experian Credit Score tells you how lenders may view you, which is useful when you apply for credit – and is FREE FOREVER. The higher your credit score, the more chance of being accepted for credit, at the best rates.
* Conducted by YouGov on behalf of CFA, 10th – 13th March 2017