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Refused Credit

Introduction

It is usually in the interest of credit providers to lend as much money as they can. However, none of us has a right to credit. Every time credit is given, there is a risk that it may not be repaid. And so, credit providers take what steps they can to make sure they only offer credit to applicants who represent an acceptable risk. We've probably seen the signs in shops, saying 'Please do not ask for credit as a refusal often offends'. People who are refused credit by a credit provider are similarly often offended. We hope that the following information will go some way to explaining why credit is sometimes refused. We also say what you can do about it if you think it has been wrongly refused.

What the law says

The Consumer Credit Acts 1974 and 2006 lay down rules for credit providers and gives details about the rights of those applying for credit. For example, if you're applying for credit and are turned down, you've a right to be told the name and address of any credit reference agency which the credit provider asked about you. Please also note that under the law, credit providers do not have to tell you the exact reason why they turn you down. But they do have to give you some indication.

Useful information

Sometimes, a credit application may be refused simply because the applicant does not fit the credit provider's 'good risk' picture. This could apply to someone who is considered too young or who has only been in full time work for a short period. If this happens to you, there's very little you can do about it. But, remember that other credit providers may not be so strict and you may like to try somewhere else.

You may also be refused credit if, in the past, you've not been able to keep up the payments on a loan or credit with the same, or another, credit provider. Most credit providers operate a credit scoring system to help them decide whether they should offer you credit. They give points to applicants who, for example, are married, own their own property and who have lived at their current address for at least three years.

Other things like income and debts are also usually taken into account. If your total score is below the credit provider's acceptable level, you'll be refused credit.

In order to get all the financial information about you to feed into their scoring system, credit providers use organisations called credit reference agencies. In the United Kingdom, these hold information on over 40 million people at 24 million addresses. The information they hold includes the electoral roll (to confirm you live at the address you say you do), county court judgments and bankruptcies, and details of previous and existing credit accounts.

If you think you've been wrongly refused credit because of an error on the credit reference agency file, or indeed at any other time, you can ask to see a copy of their file. The credit reference agency may make a small charge for this. The names and addresses of some of the main credit reference agencies are shown below. You can also apply for a copy of these files online. The web addresses of the credit reference agencies are also shown below.

If, having got a copy of your file, you find there's something wrong with it, write again to the agency to ask them to correct their file. If the agency tells you that it will not change or remove the offending entry, you can send it a 200 word notice of correction to be attached to your file. The agency can refuse your notice of correction if it thinks it is incorrect or unsuitable. Otherwise, it will attach it as requested and this will be seen in the future by any credit provider who asks for your file.

The credit reference agencies can also give you advice on improving your credit report - for example, by adding a note explaining past arrears.

What to do if you have a complaint

If you feel that the credit reference agency has unreasonably refused to remove or change an entry on your credit file, you can write to the Information Commissioner. If you feel that the credit provider has, for some other reason, unreasonably refused you credit, write to their Chief Executive. But remember, complaining about one of the credit provider's rules, like not offering credit to young people, is unlikely to get you anywhere unless you can persuade them that their rule is totally unreasonable.

From category: Money Matters