Things To Be Aware Of When Applying For Loans

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Let’s be clear. There is no such thing as a blacklist or universal credit score rating in the UK. Its just one of the many myths that surround credit scores. Each lender will score you differently so this means that if you have been rejected by one, then it doesn’t mean that others will. However, if you have been rejected then it’s always a good idea to check your credit files for any errors that you may have made.

Having a poor credit score can often feel like you’re actually blacklisted. But you need to ask yourself ‘should I lend this person money if there is a chance that I won’t get it back?’. There are lending companies that specifically specialise in lending money to those who have had problems with their credit score in the past but be aware that they put on huge rates.

The tools that the lending companies use are also not universal either. They look at your credit score, your background information on the application form and any dealings they have had with you in the past.

Applying for a loan - hand holding money

1. Your Credit Score Will Determine the Product and Rate That You Get

In the last decade, the credit score spectrum has changed a lot as a result of determining risk. This means that lenders use your credit score not only to decide whether to give you credit but also the rate you get. Some customers will get the rate that they applied for, but then others will get an inflated rate as a result of a poor credit rating.

2. You Don’t Have the Right to Be Lent Money

One thing that you need to bear in mind is that you don’t have any rights to be lent money.  The government continues to push lending companies to offer more credit. But it is the lending companies commercial decision about whether they want to lend out the money or not.

3. Register to Vote

If you are not registered on the electoral roll, then it is going to be much harder to get accepted for credit. And, you don’t have to wait for the annual reminder about elections to come throughout your door. You can sign up at any time.

You can simply follow the sign-up instructions on Gov.uk. It will ask you fill in a series of different questions that are aimed at identifying who you are and the local borough that you need to register with. Many people believe that government and local councils sell users data, but there is an opt-out option where you can leave the open electoral register which is used for marketing purposes.

Being registered on the electoral roll is a factor when credit scoring and even in cases where it isn’t, not being registered can cause your application decision to be delayed.

If you are not eligible to vote in the UK, then you will be unable to get on the electoral roll. However, you can send the credit reference companies your proof of residency and ask them to put a note on your file to verify you. This should help you get credit without being on the electoral roll.

4. Check Your Addresses on Any Old Accounts

This may sound like a minor thing, but a wrong address could have an impact on an application. For example. If you had an old mobile phone contract or a credit card that you don’t use anymore but is still listed as active on your credit files, then check the address is your current one.

If you have accounts that are still open and they list you living at a different address, then this can also affect an application. It’s important for you to go through every active account on your file and ensure that it is up to date.

5. Don’t Let You Partner or Friend’s Credit Score Play Havoc with Yours

If you are financially linked to someone like a partner or friend, then this means that their credit score files can be accessed as part of your credit application. Even if it’s a small bills account can cause you to be co-scored with them. If the person you are financially linked with has a poor credit history, then it is important that you keep your finances separate in order to secure a good credit deal.

There are only four different products that can reduce financial linking:

  • A Joint Mortgage
  • A Joint Loan
  • A Joint Bank Account
  • Utility Bills (In certain circumstances)

One thing to note down and keep in mind is that many people think that they have a joint credit card with their partner or friend. These don’t actually exist. It’s basically one person’s account in their name and the other party just has a second card to access the account.

6. If You Have Split Up with Your Partner Then You Need to Financially Split as Well

If you have split up with your partner that you have had joint finances with then, you need to separate your these. Once you have done this, then you can call the credit reference agencies and ask them for a notice of disassociation which will stop your ex-partner’s credit history affecting yours or any prospective applications in the future. However, you won’t be able to obtain a notice of disassociation if you still have a joint account open or a joint loan.

7. Payday Loans Can Have a Negative Effect on Mortgage Applications

The majority of payday loan companies suggest that using them and repaying the balance on time can improve a credit score rating as its gradually helps build up a better repayment history. However, we recommend that you use a credit rebuild card instead as they are most effective and a lot cheaper.

  • Complain to The Lender That Put It on Your Credit Reference File

Write to the lending company who put the default on your file and ask for it to be removed. Keep the writing polite and in a professional manner stating the reasons why the default is unfair. Also, tell the company that you will be taking it to the Financial Ombudsman if the default isn’t removed as requested.

  • Add a Notice of Correction to Your Credit Reference File

If writing to the lender fails to see, the unfair default removed you can add a notice of correction to the file which explains the problem. When explaining this, it needs to be short but include as many facts as possible. Adding a notice of correction will slow down any credit applications that you make as most lending companies will need to read through it manually. However, a slow but successful application is better than a rejected one.