MONEY COMMENT
Why We Get Refused Credit

By Cliff D'Arcy
January 30, 2003

After renting a flat for a couple of years, my wife and I decided to buy our first home at the end of 1992. This was only possible thanks to financial help from my parents-in-law, who lent us the cash for a 10% deposit and all our other fees.

However, our house was in a bit of a state: the previous owners had taken every possible fixture with them, except for a single light bulb that was too difficult to reach. We had no curtains, carpets or furniture - nothing.

Needing to buy furniture and fittings, we headed off to the department stores. Thanks to the property slump at the time, sales of furnishings were slow and so most stores offered "interest-free credit".

Alas, my wife was very uncomfortable and embarrassed when, in full view of other customers, a retailer turned us down for credit to buy our bed. However, I wasn't concerned as, working in financial services, I understood credit scoring.

I went over our application carefully and spotted the problem - we'd applied for credit using our new address. As it was too soon for us to be on the Electoral Register, we weren't recorded as living at this address, so the finance company had rejected our application because of a risk of fraud.

I re-submitted our application using our previous address and we were accepted without a problem!

Since then, I've been rejected for credit a few times (although my wife never has). That's because I'm a "rate tart", shopping around for the best credit card deals every few months and, in the process, building up a whole deck of cards. Applying for credit repeatedly can make some lenders suspicious, which may be why some decline your business.

I'm not alone in being turned down for credit once in a while: a recent survey from market analyst Datamonitor revealed that around 7.8 million UK adults are routinely turned down for credit. Even though this figure has fallen by 400,000 since 1998, it still means that 1 in 5 people (21%) are considered too risky by mainstream lenders.

Rejections are particularly high among the self-employed and others who cannot provide sufficient proof of income. Also, lenders don't look kindly on anyone with "adverse credit history": arrears or defaults on current or previous credit agreements, any County Court Judgments or property repossessions.

Generally speaking, you have a good chance of getting credit if you fit this "ideal customer" profile:

* Have lived at your current address for at least three years
* Receive a regular income, the higher the better
* Have been in your current job/business for three or more years
* Are married but childless (as far as lenders are concerned, DINKYS - Dual Income, No Kids make good borrowers)
* Are over 30 (they assume the older you get, the wiser you become with money)
* Already have a good credit history and/or have no adverse credit history
* Have a home telephone.

Conversely, if you don't meet several of the above criteria, you may find you get refused credit or are asked to pay higher rates of interest.

To read the information in your credit reference (lenders check this file when you apply for credit), contact Experian and Equifax. It'll cost you £2 per file and can be an eye opener: I can't believe how many different ways lenders have found to spell my surname!