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A Guide to Credit Scoring

The main reason why people get turned down for loans is because they have a poor credit score. Your credit score takes into account several factors, listed below. Different credit reference agencies may weight these factors in different ways, however these are the main items that are considered.

You will see from these that repairing your credit rating is certainly achievable, but will take time - possibly one or more years, depending on your current score and your personal circumstances.

Generally speaking, you will not be able to find out your credit score, nor will you be entitled to find out why an application for credit has been refused. However, you are entitled to see the information held in your credit file, which is the information used to calculate your credit score. If you can prove that the information held is incorrect, then you can request it to be changed. Details of your rights under the Consumer Credit Act 1974 and the Data Protection Act 1998 will be sent to you when you apply for a copy of the information held by the credit reference agency.

Different lenders will evaluate your credit score in different ways, depending on the purpose of your credit application. They may also take into account additional information that they have about you. If your credit score is low, you may qualify for a "bad credit loan" with a higher interest rate than would be offered to someone with a good credit score.

There are three credit reference agencies and they may be contacted as follows:

Experian (Tel. No: 0870 241 6212)
Equifax (Tel. No: 0870 010 0583)
Callcredit (Tel. No: 0870 060 1414)

Your credit history
Your personal credit history will include a record of missed or late payments, as well as Bankruptcies and County Court Judgements (CCJ's). These will stay on your file for a number of years. You can improve your credit history by starting to make your payments on time, and the old records will gradually have less impact on your credit score. Missing a single payment will not normally count against you, but missing three or more consecutive payments is often penalised substantially.

You should note that having existing loans or credit should not be a problem, provided that your credit file shows that the debt has been well managed. In fact, a history of managing loans well may count in your favour.

Time spent at your current address
This will be a factor if you have been living at your current address for less than three years. If you own your own home, this will be less important. The people most likely to be affected by this factor are tenants who have held multiple addresses within the past three years.

New bank account
If your bank account is new or if you have no bank account, then your credit score will be marked lower.

Lack of stable employment
If you have held more than two jobs in the past three years, then your credit score may be affected. It may also be lower if you have just recently changed jobs. If you were unemployed for periods of several months between jobs that will also be taken into account. Lenders prefer to lend to people in continuous stable employment.

Multiple credit applications
Every time a lender or potential lender applies to view your credit file, this will be recorded in the file. If you have recently applied for several loans or credit facilities within a short period of time this may count against you. The rationale behind this is that it may indicate a desperation to obtain credit.

The Electoral Register
If you are not on the Electoral Register, this will be recorded and may count against you.

Other people living at your address
Many lenders will consider the credit files of other people living at your address. They may take the view that these people are likely to be closely connected with you. This can sometimes be a problem for tenants, and if you think that a previous tenant's bad credit history may be affecting your own, you should ask to see a copy of the credit file relating to your postal address.

You may also be linked to other people if you hold a joint bank account, or if you have previously made a credit application jointly with another person, whether successful or not.

Debt Consolidation Loans UK is a trading style of Noble Business Services, 411-413 St Leonards Road, Windsor, SL4 3DT. Licensed credit brokers, licence number 323701. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. 12.5% APR typical variable.