Anyone who's been turned down for credit - whether it's a card, a mortgage, or a loan - can find it a chastening experience. Being refused for credit is not, in itself, hazardous for your credit rating but making multiple applications in a short space of time can have a serious impact on how creditworthy you are.
But - there are steps you can take to help give yourself the best chance of getting approved next time around. A key factor to help you avoid the risk of refusal is to check your credit report before you make an application for major credit (eg: a mortgage, or a loan).
Your credit report lists the credit you've had, including loans, mobile phone accounts and your mortgage, plus the repayments you've made. Lenders use the information on your credit report to decide if you'll be able to make new repayments on time. Mostly, they want to know that you will make repayments on time - and that you aren't already over-stretched. There might be some discrepancies on your credit report, such as different ways of listing your name and address, or errors such as duplicate listing of accounts or closed accounts marked as open.
- Suggestion: Check your credit report on a regular basis to ensure that it is accurate, up-to-date, and reflects your present circumstances. If you find anything that isn't, then contact the relevant lenders to get it altered. Watch out too for unfamiliar or suspicious entries in your credit report that could indicate identity fraud.
Perhaps you have missed some payments on cards or loans you have, or there are mistakes on your application form. Missed or late payments stay on your credit report for at least six years.
- Suggestion: Stay within the agreed credit limits and always make your repayments on time, paying more than the minimum off your credit cards each month if you can, as this could help pay off your debts quicker. You can explain any missed payments by adding a "notice of correction" - a statement of up to 200 words. It's important to make sure you don't miss payments in future.
Budgeting your income carefully and sticking to your re-payment plan is the best way to get out of debt quickly. Using a money manager that's free and online like Money Dashboard you can monitor the impact of your spending on your bank accounts and cards and make sure you're sticking to your goal.
Have you made several applications for credit lately? Doing so in a short space of time could make lenders believe that you're in financial difficulties, particularly if other factors also indicate you may be experiencing money troubles. A glut of recent credit applications can also be a sign of fraud. Each new application will probably result in the lender checking your credit report and leaving a credit application search footprint. Too many of these may cause alarm, regardless of whether or not you were approved, even though it isn't actually shown on your report.
- Suggestion: Space out your credit applications and avoid making several applications close together. It's good to use some credit on a regular basis, but you should never take on more than you can afford. Also, credit scoring can look at the average age of your accounts, awarding extra points for longstanding relationships, so try not to chop and change all of your accounts on a regular basis.
It could be that you're not on the electoral roll, as that helps to prove your home address and that you are who you say you are.
- Suggestion: Ensure you register to vote at your current address, as lenders use the electoral register to help confirm who you are and where you live.With a 30-day trial of Experian CreditExpert, you can see your credit report and Experian Credit Score whenever you want, and get expert advice on improving your financial situation. (New members only. Monthly fee applies after free trial. Free trial period starts on registration further ID verification may be required to access full service, which may take up to five days).
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