There are a number of reasons why your credit card application could be refused. Banks, credit card companies and other lenders make their own individual judgements on your suitability as a lender based partly on the information that you give them and partly on how likely they think you are to make them money.
Each lender will give you a credit score based on their particular lending criteria. These credit scores are not just about establishing the level of risk that you pose as a borrower – although this is very important – they are also about establishing how profitable you are likely to be.
If you pay off your credit card balance in full each month and therefore never pay any interest on the money you borrow you won’t be very profitable for the card companies. Perversely this could mean that you will be refused credit for being too safe a bet! The same could apply to people who regularly use balance transfer credit cards to avoid paying interest on their credit card balances.
The lenders initially base their credit scores on your credit card application and any dealings you might have had with the lender previously. When you apply for a credit card you provide a great deal of information about yourself, lenders then check with the credit reference agencies like Experian and Equifax.
These credit reference agencies gather information on people from the following sources: the electoral roll, court records and financial information from card companies and banks.
Your address information and the names of others at the address are on the electoral roll, the court records contain information on any county court judgements (CCJs) against you.
Financial records contain a great deal of information about any defaults or missed payments as well as other financial products you may have. All of this information is crunched together and measured against the card company’s lending criteria to produce your credit score.
You have the right to access the information that lenders see for a small fee. It can be well-worth doing this, even if you are not planning on applying for credit, as the results can be surprising.
You might even see entries relating to borrowing by members of your family – some say this is a myth but some years ago I ordered my credit file and found details of loan payments a relative had missed included on my report.
If you believe that something in your credit history is wrong then you have the right to challenge it and to have a note from you appended to your credit file. You can also disassociate yourself from another person if necessary.
To get access to your credit file and for a range of credit monitoring services contact credit reference agencies like Experian and Equifax.
