By Pat Hutchinson, District Manager, Newtownabbey CAB
Q: I have applied for credit to buy a car and I have been turned down, even though I do not have any debt, and always pay my bills on time. What can I do?
A: There is no automatic right to be granted credit and you may be refused credit for a number of different reasons. The law does not require a lender to give reasons for refusing credit, unless credit scoring was used.
Credit scoring is a system used by creditors to decide how much of a risk it is to lend to you. When you apply for credit, you complete an application form which tells the lender lots of things about you. Each fact about you is given points. All the points are added together to give a score. The higher your score, the more credit worthy you are.
Creditors set a threshold level for credit scoring. If your score is below the threshold they may decide not to lend to you, or to charge you more if they do agree to lend.
Different lenders use different systems for working out your score. They won’t tell you what your score is, but if you ask them, they must tell you which credit reference agency they used to get the information about you. You can then check whether the information they used is right.
Because creditors have different systems to work out credit scores, even if you’re refused by one creditor, you might not be refused by others.
You may be able to improve your credit score by correcting anything that is wrong on your credit reference file.
The credit reference agencies keep the following information:
- The Electoral Roll. This shows addresses you’ve been registered to vote at.
- Public records. This includes court judgments, bankruptcies, IVAs, Debt Relief Orders and Administration Orders.
- Account information. This shows how you have managed your existing accounts such as your bank account and other borrowing. It shows lenders whether you have made payments on time.
- Home repossessions.
- Financial associations. This shows details of people you are financially connected to.
- Previous credit searches in the last 12 months.
- Linked previous addresses.
If there has been any fraud against you, for example if someone has used your identity, there may be a marker against your name to protect you. You will be able to see this on your credit file.
You can ask for a copy of your credit reference file from any of the credit reference agencies (Experian, Call Credit, Equifax). If you have been refused credit, you can find out from the creditor which credit reference agency they used to make their decision. Your file shows your personal details such as your name and address, as well as your current credit commitments and payment records.
You have to pay a small fee of £2.00 to get your credit reference file. This is known as your statutory credit report and a credit reference agency must provide it to you if you ask for it.
Credit reference agencies may offer other more expensive services where you are sent a copy of your credit reference file on a regular basis. If you are thinking about signing up to this kind of service, make sure you read the details about what it will provide and check it’s what you want before agreeing to it.
If you think any of the information held on your credit reference file is wrong, you can write to the credit reference agencies and ask for it to be changed. But you can’t ask for something to be changed just because you don’t want lenders to see it.
You can also add extra information about your situation. For example, if you have had a past debt but have now paid it off. This is called a notice of correction, which might help you if you apply for credit in the future. Beware of credit repair companies who claim to clear debts and charge fees for doing so. Credit repair companies must be authorised by the Financial Conduct Authority and in order to be authorised the company will need to show that it does not make misleading claims about the services it can provide.
• Get free, confidential and independent advice from your nearest Citizens Advice Bureau – go to www.adviceguide.org.uk or call at: Newtownabbey Citizens Advice Bureau, Dunanney Centre, Rathmullan Drive, Rathcoole, Newtownabbey, BT37 9DQ. Telephone advice is available 9am – 4pm each day 028 90852271-Lunch 1:00 - 1:30pm, email advice is available on firstname.lastname@example.org