Credit Scoring Tips

Has your application for credit been declined or refused? These credit scoring tips may help you with future applications and give you background information as to how your application is credit scored by financial institutions.

Electoral Roll

If your name is not on it, rejection is almost certain. The roll is updated every October by local councils, but not fully loaded on to credit agency databases until the following April. The banks check personal identities against the roll held at a credit reference agency, but the agencies cannot guarantee to have the full data in place from local authorities until the following April. So someone who moved home in November could wait until May before their credit score improves.

County Court Judgments


Check your credit files as you may have a CCJ or default. Any more than one in the past year spells a credit rejection, but if it’s more than six years old it’s not counted.

Past Credit History


This usually makes up around 35% of your credit score. Maximum points if your payments on existing loans are regular and timely. You score less points if you regularly fall behind on store, credit card and HP agreements. If you have many credit cards this won’t count against you as long as payments have been maintained.

Address


Full points if you’ve been at your address for the last three years, but if you’ve moved house frequently, most systems will reject you. Your postcode cannot be used as the sole reason for denying you credit, but does have a weighting in your score.

Employer

The longer you have worked with the same employer, the more credit points you earn. People who move jobs regularly are regarded as a poor credit risk, even though they maybe earning a high salary because of job hopping. This is particularly applicable in the IT and Media industries.

Bank


More points if you’ve been with the same bank for years assuming you’ve had a problem free relationship. You score more points if your agreed overdraft limit has never been exceeded. Less points if it has.

Salary


If you earn a high salary, you won’t necessarily score more points. Salary is always asked for but usually ignored, except for mortgages. As salary is non-verifiable from data held at agencies, what you put down is deemed unreliable.

Related Parties


The systems will check similar surnames at the same address. If they have poor credit history, your application is likely to be referred.

Number of Credit Applications


You are regarded as risky if your credit file shows more than six credit applications in recent months, they take no account of whether you have been rejected or accepted. Three to four applications per year is regarded as normal. It’s also wise not to respond to a junk mail offer too soon as earlier applicants are more likely to be rejected. Records show early applicants are more likely to default.

Age


Usually not a major factor in the score card, although it can be easier for younger applicants. If you are 45 and have never applied for credit, the systems regard this as suspicious compared to a 25 year old taking out their first credit card.