All you need to know when you have been refused credit

Credit refusal: know the score and take control

Guest post  by James Jones Experian’s Head of Consumer Affairs

See All you need to know about credit score rating for James’ previous post regarding , myths and how to up your credit score

Credit application refusal

Credit is an important source of additional funding which many of us will need for those large and often expensive projects, such as a house redecoration, a new kitchen or a new car. A credit application may be accepted or may be refused. This article is about what to do when credit is refused.

Credit refusal can be many things: frustrating, annoying, embarrassing, confusing, worrying – to name a few. But one thing it isn’t: uncommon.

Banks and other lenders decline thousands of credit applications every single day. And while access to credit isn’t a right – in that lenders are completely free to set their own criteria and to turn away customers who fail to meet them – you do have a right to be treated fairly.

What to do if your credit application is refused

So, if your credit application is turned down, you should expect the lender’s response to be helpful. For example, they should be able to explain the main reason your application fell short, giving you the opportunity to take action to improve your chances of success next time.

What you certainly want to avoid is panic and speculative applications to other lenders. If there’s a snag, such as a payment hiccup on your credit report you weren’t aware of, submitting multiple applications in the hope one lender will say “yes” is only likely to make matters worse.

If the lender isn’t upfront about the reason, go back and ask. If necessary, get the details of someone who can tell you and contact them. You might, for example, need to write to the head office. But it’s worth persevering because only the lender knows what the issue was and until you find out you’ll remain in the dark. If you’re using a financial adviser or broker then ask him/her to liaise with the lender to obtain the reason for refusal.

After you get the reason, you’ll be in a better position to work out your next move. And this can vary widely depending on issue – which is probably a good moment for us to quickly look at how lenders decide.

How a lender decides whether to give you credit

Most lenders look at three sources of information when assessing a credit application:

  • Your application form – including your job, salary, residential status and bank details
  • Their existing records – if you’ve been a customer of the lender in the past
  • Your credit report – how you’ve managed other credit in the last six years plus any other relevant records, such as county court judgments and past credit checks

Adding up the score

Most lenders will use a computerised scorecard to assess this information, in order to answer the following questions.

  1. What are the chances you’ll meet your repayments?
  2. Can you realistically afford them?

The answer to question 1. is your credit score, which is simply an expression of probability. If your score exceeds the lender’s pass-mark (and you can comfortably afford the repayments) then there’s a good chance of success.

However, alongside these scores, many lenders have policy rules that can individually determine the outcome of your application, irrespective of your score. Here are some examples of factors which lenders may use to set policy rules:

  • Unpaid default or county court judgment
  • Under 18 years old
  • Undischarged bankrupt
  • Income below £x

Action you can take if your credit application is rejected

As you can see from the above, there is a wide range of factors that lenders consider and it is certainly not just a question of whether your application meets the minimum credit score. This is exactly why you should always press the lender for the main reason they said “no”, to help you work out what to do next.

For example, if they tell you your application failed to reach the required credit score, you should ask the lender which credit reference agency (CRA) they used and take the opportunity to order a free copy of your credit report. Then, make sure everything on there is accurate and upto-date and, where available, review the CRA’s guide credit score to get their view on the health of your credit history. If there are no obvious problems, return to the lender with a copy of your credit report and ask them to look at your application again.

You might not know that, by law, if your application was refused solely because of an automated credit score, you can require the lender to review it manually, which means a human being will look over your application. This also gives you the opportunity to send in additional supporting information, including statements showing regular payments, such as council tax.

If the lender tells you the problem was affordability, then take the opportunity to review your spending. Cutting non-essential costs, such as unused gym memberships, or opting for supermarket own brands could help lift your finances into a healthier position and make you a better candidate for credit next time.

Whatever the reason, once you’re in the know you’ll be in a stronger position to either challenge the lender’s decision or improve your situation for the future. You should also consider using a credit-eligibility service, which can help you see which credit products you fit the criteria of before you apply, limiting the prospect of further setbacks.

For more guidance on troubleshooting a credit refusal, check out Experian’s credit refusal interactive guide.

About the author

James Jones

James Jones is Experian’s Head of Consumer Affairs and leads the company’s public education programme, advising people on, for example, credit reports, credit ratings and identity fraud. James is frequently on TV and radio, and regularly answers people’s questions through both traditional media and online via the Experian website, Facebook and Twitter. He began his career at Experian in 1992 after graduating from Cambridge. He loves travel, sport and real ale, and regularly combines all three by following Nottingham Forest and Nottinghamshire County Cricket Club.

 

 

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Don’t get penalised for being loyal to your telecoms provider

The telecoms loyalty penalty

You might hope that being a loyal customer to a company would result in that company being loyal to you and treating you well. However, unfortunately, loyalty is penalised in many consumer sectors, including insurance, energy and telecoms. In so many cases, a new subscriber will get a better deal than a loyal customer who has been with the company for years.

Why do they do this? Well, it’s easy to entice a new customer with low-priced offers. Whereas companies can take advantage of the fact that many existing customers will stay, even if the pricing isn’t great, because people think it’s too much hassle to change.

Ofcom has recently announced changes which will hopefully help improve the situation in the telecoms sector. The regulator says that 40% of all households are overpaying for their broadband and the extra customers are paying could be at least £100 more a year.

why you should write not phone to complain

Ringing the changes

From 15 February 2020 all broadband providers must tell customers when their contract comes to an end and inform them about the best deals being offered to new clients. Does this go far enough to help the 8 and 1/2 million households affected get a better broadband deal and save money?

Issues with changing packages

With many providers you can upgrade online but to downgrade you have to ring the company’s customer service line. This means the inevitable long waits and then hearing them trying to convince you to stay or to upgrade. In its research Which? found that One in two of us abandon customer service calls.  69% of people who gave up on a call said they were on hold for too long.

I recently downgraded my package with Virgin Media. They refused to do it in writing. I refused to  discuss it over the phone and waste my time. I won. I emailed the CEO’s office and told them to give me the options in writing or I would go to the Ombudsman. I got my package downgraded. You can get CEO details from

Ofcom’s Director of Consumer Policy, Selina Chadha, told the BBC Moneybox programme that the regulator wants companies to treat their customers fairly. “It should be as easy to sign up to something and that would go for upgrading and downgrading as well I think that as a principle that’s absolutely right”.

Issues with switching providers

In December 2019 Ofcom launched a Consultation titled: Fair treatment and easier switching for broadband and mobile customers – Proposals to implement the new European Electronic Communications Code. However, given that the consultation document is 193 pages long (!), one does wonder how many consumers will actually respond!

A big issue for many consumers wanting to switch is not wanting to lose their email address. Companies must already allow customers to keep their phone number when switching and in 2020 I think we can all agree that one’s email address is as crucial as one’s number, possibly more so when it’s used as identification on so many websites! Chadha said Ofcom would do something about it if it was shown to be a barrier to switching. Seriously? Isn’t it obvious?!

10 Top Tips for getting the best Telecoms deals

  1. Have a good look at, and write down, what you are using with your current contract. What do you need? Check the download speeds. Check what you are and are not using. Do you use the add ons like Spotify, etc.
  2. Use comparison websites such as Moneysupermarket.com, Compare the market etc. as well as going to telecoms providers’ sites direct. Get an idea of the range of packages available and what you are prepared to pay before you make any decisions or start to haggle with your current provider.
  3. Use all the information you have gleaned from comparison and cashback sites when speaking to someone. Remember, if you’re ordering by telephone or on the internet you have 14 days to cancel should a better deal come along in the meantime.
  4. Haggle on the length of the deal you get offered as well as the price.
  5. Use cashback sites, such as Top Cashback and Quidco. Check them all as they have different offers.
  6. Consider any add ons that would give extra value if thrown in to any bundle but aren’t essential.
  7. If you can’t bear to wait on the phone, try Live Chat.
  8. Try contacting the CEO’s office. You can find the email address for any telecoms CEO on the website ceoemail.com Point out that you are a long standing loyal customer and that you don’t want to leave but will be forced to do so if it is not possible to receive a better offer. The CEO may not respond personally but someone from the Executive team will do.
  9. Check to see if you have any deals available with credit cards or discount cards you may have, such as a student card which may give you some money off a package.
  10. Be polite and assertive. If you are rude then no-one is going to want to offer you anything. Be assertive and persistent, politely arguing for a deal you want.

So let’s hope that Ofcom bring in more rules and soon. In the meantime to do fight for that better deal!

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All you need to know about complaining to telecom providers

 

 

 

 


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