What to do if Refused Credit

Any type of credit, from mortgages, bank loans to credit cards, is getting more difficult to secure. Rejection rates for credit card applications, for example, are running at nearly 20,000 a day. If you number amongst those refused credit recently – do not take offence, take action.

Here are some tips to help stop the credit crunch becoming a credit crisis:

1. Check your credit report regularly: Make sure that every entry is correct. In the current economic climate, a single clerical error could result in rejection of a credit application. You can access your credit report for free at http://www.experian.co.uk/creditreport/

2. Manage money carefully: Pay bills and make repayments on cards, loans and your mortgage on time – otherwise your credit rating will be damaged. Keeping a record of what you are spending is useful. It helps identify unnecessary expenditure.

3. Trim your bills: Try price comparison sites to find the best deals on loans, mortgages and credit cards, as well as electricity, gas, and telephones. The Financial Services Authority’s “financial health check” http://www.moneymadeclear.fsa.gov.uk offers useful advice on budgeting.

4. Consolidate debts charging high interest: Credit card debts, for example, can be rolled into a single, cheaper package, like a bank loan. There are plenty of financial comparison sites with calculators that can help you to identify the best option.

5. Do not attempt to borrow yourself out of trouble: The debts will soon stack up. Every application will be recorded on your credit report. Too many applications and lenders may think that you are in financial difficulty – then you are more likely to be rejected for credit you really need in the future.

6. Look for ways to supplement your income: For example, you could get a part-time job in the evenings or at weekends, sell off unwanted household items, or even take in a lodger.

7. If financial trouble is looming: Talk to your lenders, particularly the mortgage lender. They will often help you to work out a revised schedule of repayments you can afford, or even arrange a temporary repayment holiday.

8. Make sure your partner has no hidden financial problems: If you have a joint account, or have applied for credit with a partner, you will be linked. The name of your financial partner will appear on your credit report. You may not know if he, or she has had any problems, but a lender will check. So get your partner to check their credit report, too. If you are no longer together, make sure you get the link broken – called a disassociation – so that any problems your former partner might be having do not cause you problems.

9. Register to vote: Lenders use the electoral roll to help verify identity. They also check for stable residency; that you have lived at the same address for a number of years. If you fail to register to vote, lenders cannot easily verify that you are who you say you are, and may ask for additional identification, or even turn down your application outright.

10. Get free advice: Free advice is available on anything from assessing your financial situation to your legal position. Try the Consumer Credit Counseling Service at http://www.cccs.co.uk, National Debt Line at http://www.nationaldebtline.co.uk, and Citizens Advice at http://www.citizensadvice.org.uk