Credit Cards & Scoring

Before a Credit Card company accepts or rejects your application for a credit card they will invariably undertake a credit review to establish if you are a good or bad credit risk.  They will do this in two principle ways:  they will conduct a credit check and credit scoring review.

What is a credit check?

A credit check will be made on factual information held about you on a credit register.  The are three main credit reference agencies collecting and holding information on us. These are Equifax, Experian and Callcredit.  The information these agencies hold will allow the lender to check details including your name and address, your credit history with other lenders, as well as any County Court Judgements (CCJ’s) or defaults recorded against your name.  Together this information will form your ‘credit refererence’.  This credit reference therefore will determine your ability to secure a credit card and borrow money at attractive rates of interest.

credit reviewWhat is Credit Scoring?

Credit scoring is a method of rating your credit application by applying a value or ‘score’ to the answers that you provide when completing your credit application.  A lender will hold their scoring system confidential, but it is likely they will award scores based on things like: how long you have been resident at your current address, how long you have held your bank account, your occupation and how long you have been employed in your current job, and your annual household income.

You should, at any rate, regularly check your credit reference files yourself so you can see what the lenders or credit card companies are seeing. Another advantage is that It will also help you know if anyone is fraudulently using your name to open new credit agreements.  The main credit reference agencies are Experian and Equifax and you should check them both if only to confirm that the information they hold on you is correct.  The third agency, Callcredit, is a fairly new company.

What if your Credit Card Application is Turned Down?

There are a whole range of reasons why a credit card application may be turned down.  First of all, it is worth remembering that it is NOT your automatic right to have a credit card.  A poor credit rating in itself may not mean that you are unable to get a credit card.  It might mean that you have to suffer a slightly higher rate of interest.  For example they may offer a card based on a higher higher interest rate and perhaps coupled with a lower spending limit. The Vanquis Credit Card is an example of such a credit option. They will consider people who have had CCJ’s or a poor credit history.

A lender does have to inform you why they have not accepted your application, but the level of detail they provide is only general.

One thing you should consider doing is checking the accuracy of the information recorded on your own credit file by the credit agencies.  This is very important, as a common reason for not being accepted for credit, is because the information held about you on the credit agencies databases either suggests that you could not afford to repay your credit, or, you do not appear on the electoral role.

How Can I check my Personal Credit File?

The are three main credit reference agencies collecting information on us. These are Equifax, Experian and Callcredit.  Each time we take a form of credit, it will be recorded on their databases and used to establish out creditworthiness.

All three of these credit agencies provide a service so that you can check your own credit file online. There is a small fee, but considering how important the information held about us is in relation to our ability to secure credit, then we believe it is worthwhile undertaking a check from time-to-time.

Remember, the credit agencies themselves do not approve or reject your application for credit.  But the information they hold and supply to the lenders will play an important part in their overall decision.