Why you can't get credit
There are many reasons why you may get turned down for credit. Some are obvious, some are less so.
Sections
Credit Rating Paradoxes
You've borrowed too much.
You've borrowed too little.
Lenders won't want to lend you money if they think your debts are too high, for obvious reasons. However, lenders want to know how responsibly you handle debt, so they want to see a credit history. Therefore if you've never had credit they don't know you, and what they don't know scares them.
Keep your credit limit high.
Lower your credit limit.
Some people suggest that you should keep your card balances at 25% of your credit limit or lower. They argue that it makes you look more responsible, because you're not running dangerously close to the edge. But what is more realistic is the believe that you should lower your credit limits when you can in order to decrease your total credit facility, thus making other lenders more comfortable when lending to you.
Don't apply for credit too often.
Keep applying for credit - it's a numbers game.
It's well known that when you apply for credit a lender will search your credit record and too many searches will reduce your credit score. Therefore make sure you're not applying too often and make use of 'soft searches' which won't make a mark on your credit score.
You have a credit score.
You have lots of credit scores.
You have no credit score.
As lenders come up with their own rating system based on what they believe makes a customer suitable, it's hard to know if you'll be approved or not. Therefore it's important to concentrate on the big things that will definitely improve your rating.
- Pay your bills on time. If you can't do this, don't ignore the problem! Contact the lender to explain the situation and discuss what you can do about it.
- Keep your debts low.
- It helps to have a long credit history.
- Pay your debts off straight away, so they can see you're good with money.
There are other factors that will affect your credit rating with some lenders. The main ones are:
- Whether you're on the electoral role.
- How long you've been living at your current address.
- How long you've held your bank account for.
More on debt:
Problem debt: will I ever be able to get a mortgage?
Numbers struggling with payday loan debt doubles
Overdrafts: the debt problem you didn't realise you had
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