First of all, don’t take it personally. No-one has a ‘right’ to credit, and every lender has it in their power to decline applications which they do not wish to accept. Just as you have every right to say ‘Sorry, No’ to a friend who wants to borrow money from you.
Every lender has different criteria and business motives in offering credit. For some companies it is the way they make their money (eg credit card firms), for others it is a way of obtaining sales from people who otherwise wouldn’t buy from them that day (eg interest free offers on furniture or televisions). Because of this, and because of the commercial conditions and goals different companies work to, they all make their decisions in different ways and for different reasons. This means that just because one company turned you down does not mean others will.
First things first
The first thing to do is find out why you were declined. The good practice codes by which most bad credit lending companies promise to operate require them to give you a general reason for the decline. They don’t have to go into detail, and mostly will say something like ‘you did not meet our credit score’, or ‘there was information detrimental to your application discovered when conducting a credit search’.
If information obtained from a credit reference agency was influential to their decision to decline your application (and you were applying for credit of up to £25,000), the lenders are obliged by law to give you the name and address of the agency they used. Typically this will be printed on the letter declining your application, but if it is not you have a statutory right for 28 days to obtain the information from them.
Don’t hesitate just act!
Write to the lender stating that you are requiring the name and address of the credit reference agency to be sent to you within seven days, as is your right under the Consumer Credit Act 1974, Section 157. If no search was made, they do not have to reply to your letter, though they normally will anyway.
Once you have the name of the reference agency used by the lender, apply to them to see your file. You can then set about correcting any erroneous information appearing on the file which may have influenced the decision to decline your application.
If you have any information which supports your application which you have not already shown to the lender (for example a bank statement showing your address and income, in case they haven’t been able to verify the information from other sources), you can write to the Chief Lending Office of the company, enclosing the additional information or proofs, and asking that your application be reviewed.
Unfortunately, should your application remain declined despite an appeal, there is little more you can do. Try and find a lender who is more sympathetic to your requests – as we said at the beginning, they all make decisions on different bases, and just because one turned you down doesn’t mean they all will.
A word of warning. Applying for too many credit lines within a short period of time will temporarily damage your credit file, so proceed with caution.
How do bad credit loans work
Each lender has different scoring procedures, and are cagey about revealing the criteria they use so as not to encourage or facilitate fraudulent applications. In the main, the highest scores are given to applicants who:
- Are homeowners with no mortgage (eg paid off mortgage or inherited property)
- Have two dependent children
- Are on the Electoral Roll at their current address
- Have had a clean address for three years or more
- Have been with their current employer and bank (in good standing) for at least three years
- Have existing credit cards, cheque card and a well-conducted loan/HP agreement
The quickest and easiest way to improve your credit score is to obtain one or more store cards. Cards issued by GE Capital Bank tend to be the easiest to obtain, requiring only a clean address and either a cheque or credit card in the applicant’s name. GE issue cards on behalf of Debenhams, Burtons, Evans, Adams, Dorothy Perkins, Top Shop and other High St stores. You can apply in store with the minimum of fuss, no proof of address, etc. It does not matter if you are not on the Electoral Roll. Holding any of these cards will assist you with applications for further credit facilities.
It used to be that the Electoral Roll was only updated and published once a year. If you did not get on the Roll by October/November 2016 for example, you wouldn’t show up on the roll from a credit perspective until February 2017! However, with Rolling Registration this is no longer an issue, and you can join the Roll at any time. You should make sure you are on the Roll as soon as possible, and the entry will normally appear on your credit file within six weeks.
Confirm your identity!
It also assists applications for credit if the applicant has a cheque guarantee card, though because of the Data Protection Act, lenders cannot actually confirm with your bank that you do hold a card. However, if your bank account details do not correspond with a type of account that issues guarantee cards, you must state that the guarantee card is actually issued on another account. Otherwise, lenders will assume you are lying, and decline the application. They may ask for the details of the card-issuing account.