Credit rating systems are used by lenders to help predict the likelihood of a customer repaying a debt. They exist solely to maximise company profits, by helping to eliminate customers deemed as a poor investment.
Being classified as a ‘poor investment’ doesn’t necessarily mean that you are viewed as unreliable. For example, credit card companies may reject your application if you have a habit of repaying cards in full every month. Credit card companies don’t profit from a financially organised lender. A customer who is perpetually in debt, who only repays the minimum each month, is financially far more valuable than a customer who clears there balance at the end of each month.
Your credit rating will be checked whenever you apply for any form of credit, whether it’s personal
loans, secured
loans, mortgages, credit cards or even monthly car insurance. There is no escaping a credit rating check.
But what can you do to improve you credit rating if you’ve been refused credit?
The first thing to do is to obtain a copy of your credit rating. This can be done online by using any of the three credit reference agencies (Experian, Equifax and Callcredit plc). Once you have verified that the information held about you is correct then you have a number of choices to help increase your chances of being accepted for future credit agreements.
The electoral role – ensure that you are included on the electoral register. If you’re not on the roll, then you have little chance of getting credit from any lender.
Timing – avoid making multiple credit attempts within a short time period as this could have a negative affect on you credit score. Credit searches will leave notes on your file, so leave a reasonable amount of time between multiple applications, including applications for car insurance, mobile phones secured
loans etc. This will minimize the impact to your credit score.
Deal with rejection – If you encounter a credit refusal that is due to an error on your credit rating but you continue to apply for credit without realizing, then this could cause you to become trapped within a rejection spiral. Even once the error is corrected you could find that you continue to be refused credit because of all the recent searches on your account.
By fighting your corner with the agency and the lender, it may be possible to rectify this problem, but this is often no easy task.
