Know the score on credit

Britain’s Got Talent star Simon Cowell and girl-about-town Kelly Osbourne have both suffered the annoyance of having their credit card rejected at the till. But neither of them have to really worry about the problem of being turned down for credit.

That’s not the case for millions of the rest of us – research shows more than 4.1 million credit card bills have been missed in the last six months.

Missing a credit card bill is bad enough and can lead to serious problems – but what can you do if you get turned down for credit in the first place? And why do people get turned down?

It’s a matter of knowing the score on credit and can show you how to make sure you are keeping score.

Scores on the doors

The key to understanding why you’ve been turned down for a credit card, loan or mortgage is your credit score.

Almost everyone will have a credit score and it is based your credit report. The credit report is held by credit reference agencies such as Experian or Equifax and is used by lenders to determine whether you qualify for a loan or card.

They use a mathematical model to work out what the risk is for a lender in providing you with a service. The higher you score the less risk you present to lenders and the more likely you are to get credit.

Scoring – and winning

  • Your payment history will count against you if it shows a record of late payments. If however all your credit arrangements are up to date you should score well
  • Serious problems such as bankruptcy or county court judgements will also hit your credit record
  • Being on the Electoral Roll can help your score. The same applies to how long you’ve lived at your current home address and how long you’ve been in your current job
  • How much you owe will count against you if you’re close to your credit limit. Credit limits are based on your salary and whether or not loans or secured or unsecured. Homeowners generally score better
  • The length of your credit history will count in your favour. If you’ve been borrowing money and handling your debts well then your score will go up. If you’ve never borrowed money before they your score will be lower
  • Too many accounts will count against you. If you have a lot of credit accounts open – even if they’re all up to date – then that will lower your score and make it harder to borrow money
  • Too many accounts opened in a short period of time will also hit your score
  • And too many searches on your credit report by lenders will also hurt your score. It can look like you are desperate for cash and are applying everywhere

Knowing the score

If a lender does turn you down they have to let you know why. It’s always worth asking for your credit report to check whether it is up to date. If you find there is an error on the report contact the agency which compiled it. If the details are factually incorrect then they will have to change them. If the details are correct, but don’t reflect what actually happened then you can write a short submission which reflects your side of the story.

To get a free copy of your credit report your best bet is to contact CreditExpert, which is run by Experian.

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