Tag Archives: refused credit

Understanding why you were refused credit

The monthly financesIt 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

Understanding the impact of your credit report

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

Why was I refused a mortgage?

If your mortgage application is refused, it can be not only frustrating but inconvenient, as it can affect or even halt many plans you may have already made.

The Mortgage Advice Bureau now says that the average age of a first-time buyer is now 37, which would make a standard 25-year mortgage take them to 62. However, this figure is likely to creep up, as high house prices up and down the country take first-time buyer ages beyond 40.

The mortgage affordability rules introduced in April 2014 take into account not only how much you are earning, but how much you are spending, and whether you actually have the money to make your monthly mortgage repayment.  It could even lead to longer-term mortgages, potentially taking people past 65.

The consequence for many people though is that credit refusal can often lead to more attempts to get credit – and making multiple applications in a short space of time could have a serious impact on your chances of getting credit in the future.

There are a number of reasons you might be turned down – and finding out what they are could get you back on track.

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Refused credit? A five-point plan of action

denied-creditIt can be galling when you make an unsuccessful credit application, though it’s worth remembering that being refused for credit is not, in itself, hazardous for your credit rating. While your credit report will show that you applied for a credit card (a credit-application footprint will appear on your report for one year), it will not show the outcome of that application.

 

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