Welcome to BuyAssociation.co.uk

Improve your credit rating

Introduction

Humiliation can strike anywhere, at any moment. You might be in a shopping queue, in a car showroom, sitting in front of a computer, even hanging on the phone in your own home.

One moment you thought your purchase was being approved, the next you are told that a card issuer has refused credit, or your loan application is being turned down.

While most attention has rightly focused on the past few years’ lending boom, fewer realise how often people are denied credit.

The rejections form a surprisingly high proportion of all applications. According to the Credit Card Research Group, between 40 and 60 per cent of all applications for new cards are turned down, depending on the issuer.

If that happens to you, what can you do about it?

How does credit scoring happen?

Before they agree to lend money, issue a new card, or finance your hire-purchase deal, all credit providers go to one of three main credit reference agencies to find out more about you.

These agencies collate a mass of publicly available information about every adult in the UK, culled from a variety of sources. In addition, all lenders contribute additional data on their borrowers to those agencies, which is then pooled.

Lenders use that data as a large element of the scoring system they use when considering credit applications.

For example, this information includes:

• People on the electoral register at your address(es)

• Your credit agreements, including details of any late payments and defaults – which can be held for up to six years

• Court judgments and bankruptcy orders against you – these are also be held for six years

• Previous applications for credit

• People living at the same address as you, such as your family, plus information on their credit history

The important point to note here is that the reference agency itself is not “blacklisting” you. It simply provides information. It is then up to the credit provider to operate its own scoring system based on the information it has received.

This means that depending on the individual criteria applied by a provider, you may either be accepted or turned down.

What you can do about a poor reference?

Although credit reference agencies pride themselves on their accuracy, mistakes in the hundreds of millions of pieces of information they receive will inevitably creep through.

If you are a victim of a mistake, it is possible to contact the credit reference agency to correct any mistakes about you. You can also add a note to your file explaining any missed payments. Another is to build up a solid credit history.

Check your credit rating

The Data Protection Act entitles you to know what is in your credit report and, where necessary, challenge its accuracy.

For example, Equifax, one of the largest credit reference agencies receives applications for written information from about 600,000 people a year.

If you want to do this, send your name and address, together with a cheque or postal order for £2.00 and a list of your previous addresses over the last six years, to each of the three main credit reference agencies in the UK:

• Callcredit, Consumer Services Team, PO Box 491, Leeds, LS3 1WZ

• Equifax, Credit File Advice Centre, PO Box 1140, Bradford, BD1 5US

• Experian, Consumer Help Service, P.O. Box 8000, Nottingham, NG1 5GX

In some cases, you may also apply to see the report online. But it could cost you more.

Correcting mistakes

If there is a mistake on your file, it is not just a case of asking for it to be corrected by the reference agency itself.

You must contact the organisation that provided the information. The reference agency can help with details, including an address.

Then write to that organisation and ask it to correct any incorrect details about you and to inform the credit reference agencies. You will have to provide a written reason, with a factual explanation for that organisation to correct any wrong or misleading information about you.

For example:

• If there are entries that involve credit account information (lenders or credit card issuers for example) you must contact the lender directly

• If the information concerns a bankruptcy that occurred several years ago, contact the Official Receiver who dealt with the case. Ask for a letter to say you have discharged your bankruptcy

• If it concerns a County Court Judgement (CCJ), contact the County Court directly and ask for a "certificate of satisfaction" to the effect that you have paid the debt concerned

• If there are entries on your personal file that relate to a family member or someone else living at your address, you need to have a "disassociation" created. This breaks the link between you and anyone else at the address who may have a poor credit history

More pages

Page 1: Introduction
Page 2: Building a credit history

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