COMMENT
Why You Can't Get Credit

By Jane Mack (TMFJane)
December 6, 2005

If you've been turned down for a credit card or a loan and you can't think why, the first place to look for an explanation is your credit file.

Your credit report details your borrowings and your track record on repayments and it enables prospective lenders to check your personal financial history to see if you're a good bet to lend money to.

You could, of course, get turned down because you're too good a borrower ie: you pay your credit card off in full every month, thereby stopping the card issuer from making any money out of you. But sometimes there are other reasons why you may be refused credit:

1) Your credit history looks dubious already

You've borrowed a lot, some of your payments have been a bit late or you've defaulted on them, all of which points towards you not being able to handle your current commitments. If you can't cope now, why would a lender want to loan you even more money?

If there's a good reason for your problems such as an accident or illness, you can add an explanation to your files so prospective lenders can take it into account. Otherwise, the most effective way to improve your credit history is to make your repayments on time so that you start to look like a responsible borrower.

2) Your partner's the problem

If you share a credit card with your beloved, you could be found guilty by association. You may not know if he or she has been having financial problems but a lender will check and so should you. If lenders are inexplicably rejecting you, ask your partner to get hold of his/her credit report to see if that's where the problem lies.

3) You've made too many applications

If you want to test the water to see if you can make use of the better credit deals, make sure you specifically ask for a quotation rather than making a full application. If it's treated as a full application then prospective lenders will run a search on your credit files and leave a footprint when they do so - too many footprints and it could make other lenders think you're overstretching yourself.

4) You haven't registered to vote

Lenders use the electoral roll to help check that you are who you say you are and live where you say you live. They also look for stability that you've lived at the same address for some years. If you fail to register to vote, they cannot verify your identity so are unlikely to lend you money. If you need to register, get in touch with your local authority to tell them.

5) You've forgotten to cancel old and unused cards

It won't look good if you've got lots of old credit cards on your file so make sure you cancel them when you no longer need them. The fact that you've had them will stay on your files for six years but they will show up as settled and will eventually disappear off the books. Just don't cancel a whole load at once because, just as multiple card applications look a tad suspicious, so do multiple cancellations.

So, check your credit reference files yourself so you can see what prospective lenders will see when they carry out a search and to make sure the information they hold is accurate. The main reference agencies are Experian and Equifax and you should check them both as they don't always hold the same details.

Check out our new Credit Report Centre