Credit Reports and Borrowing Money
Don't Let Surprise Bad Credit Stop a Loan Application Being Approved
Sep 12, 2008
Although finance companies will check a credit report for defaults and CCJ's, good credit doesn't guarantee loan application approval. Financial institutions have a set of criteria that they follow when determining whether a loan application will be accepted or rejected.
Those Likely to Have a Loan Application Rejected
- Bad credit. Those with bad credit, such as a County Court Judgement or CCJ, will find that they will have a loan application rejected or will have to pay a higher rate of APR in order to borrow money;
- Debt Solutions. People that have struggled with financial difficulties, such as credit card debt they were unable to repay, and have sought a debt solution. The main debt solutions are: personal bankruptcy, an Individual Voluntary Arrangement or IVA and Debt Management Plans;
- No credit history. Those with no credit history find it difficult to borrow money because the financial institutions have little or nothing to assess;
- Young people. Those under the age of 21 are vastly more likely to have their loan application rejected because default levels are so high;
- Reliable credit card payers. If borrowers settle credit card debt in full each month, lenders make less money. Their dream customer is someone who makes the minimum monthly payment on credit card debt and makes a late payment in doing so.
What Do Banks Know About Potential Customers?
The banks don't know nearly as much about those wishing to borrow money as might be thought. They obviously know any past dealings with an existing customer. Lenders also have access to the information on the credit report and those that someone has a financial connection to.
What Information Does a Credit Report Reveal?
If a customer has experienced financial difficulties over 6 years ago these will no longer be available. Lenders also won't be aware of any savings, problematic medical histories, previous criminal convictions, student loans or if payments are being made to the Child Support Agency.
Maximising The Chances of Getting A Credit Application Approved?
- Always pay bills on time. Not paying off credit card debt on time will lead to a bad credit history;
- The electoral register. Ensure that all names of those wishing to borrow money are on the electoral register;
- Check for credit report errors. Get hold of a copy of a credit report from Experian, Equifax or Call Credit. If there are any errors, get these amended;
- Don't make too many applications for credit. Credit applications stay on credit reports for a period of 12 months. The more applications made the less the chance of securing credit as it arouses the suspicion of the lender. Can this individual afford to borrow money? A borrower may be deemed too high risk to lend money to;
- Unused store and credit cards. Close down any obsolete sources of credit that are never used.
If still struggling to secure a consolidation loan there are a number of lenders who specialise in bad credit loan applications. Don't limit a search to just the high street banks as they are far more likely to reject someone with a bad credit history.
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