Written by In the current economic climate ensuring you do not have a poor credit rating is important. So, are you on a credit blacklist?
There is a very simple answer to this question. No, you’re not on a credit blacklist. The reason for being so certain about the credit blacklist is in fact a myth.
Credit reference agencies are only allowed by law to contain information about you which is factual in nature. Indeed almost all of the information is compiled from only two sources. The first is the public record, which you yourself have access to and can with a little bit of effort you can check whether it is accurate. The second is source of information is provided directly by lenders and financial institutions with whom you have had some form of credit relationship, either currently or at some time in the recent past.
Credit reference agencies provide a central reference point, also known as your credit file or credit report, for the above information. The information provided is factual and there is no scope on the credit report for offering opinions about whether you will repay the credit they have extended to you.
Actually, the real truth is that most lending decisions made by these companies are based upon a formula for assessing your credit strength. This formulaic approach is known as credit scoring. The credit scoring approach uses information from both your credit application form and your credit report provided by the credit reference agency. It may surprise you to discover that the vast majority of information held about individuals on credit files is of good payment history.
Credit Scoring
So what is credit scoring?
Well, credit scoring is a method established by lenders and other financial institutions to give them an idea as to whether a person is sufficiently good credit risk to lend money to. The credit scoring approach takes information from various sources, some held by credit reference agencies, some publicly available information and any additional information you may have provided from your credit application.
Each individual lending company or financial institution will place a weightings to different parts of the information they hold. These weightings will be based upon extensive research and perhaps even more extensive experience in the field of lending. It is quite likely that each lender has had different lending experiences or are targeting different parts of the lending market and therefore use different weightings.
At the end of this weighting process the lender will aggregate their weightings into an overall credit score. It is this credit score that is usually the determining factor behind their decision to accept or reject your credit application.
It may seem that this process is a dark art, and it is certainly true that the lending company will keep secret the weighting factors used in its credit scoring process as disclosure would encourage unscrupulous applicants fitting their information to the credit scoring weightings to achieve a better than reality score. The key factor to keep in mind is that you simply won’t know for sure. It is possible that the information supplied by you just did not fit the ideal ‘customer profile’ of that lender. In such cases it is unlikely that the information provided by the credit reference agency was not used in this decision. As noted above different companies take different information into account and therefore your application may be accepted by one company but declined by another.
However, should a lender or financial institution decline your credit application they really should tell you what the main reason for your rejection was. If they do not you should write to them enquiring the reason. They are required by law to give you the reason. They must tell you whether their decision was based upon a credit score, information held on your credit file or on their own specific policy. If the decision was based upon your credit report, the lender should also tell you the name and address of the credit reference agency they used.
Your Credit Report
Now for a piece of advice.
Check you credit report regularly!
It is always a good idea, on a regular basis to obtain your credit report. If you wish to know how to do this it is covered in a post on this web site informing you how your undertake the credit repair process. Getting hold of a copy of your credit report is especially important either before you make a credit application or just after a credit application if you are declined credit as a some piece of information held by the credit reference agency.
Remember your credit report will include all the information that any lender or financial institution you apply to may see and the information contained on the report will help you to establish why your application to them was declined. Your credit report will not state the reason you have been declined because only the company you applied to will know this. But if the reason you have been declined is due to adverse credit information contained on your credit file then by reading the file you will at least understand what that adverse information might be. In addition it may be that some of the information included is inaccurate, or in just plain error. If this is the case then there are practical steps which you can undertake to have this information corrected.
Before wrapping this article up there is just one final piece of advice. If your credit application has been declined by a particular lending or financial institution. Establish what the reasons for the application being declined were first and then fix them. Do not be tempted to make repeated applications for credit after you have been declined based on the possibility that should you make enough applications you may just get one approved. Applying for credit is not like job seeking. Each application you make is likely to result in a search of your credit report. As is noted in the article on this website describing the information contained in your credit report these searches will be registered and may well affect the success of all future applications.
Establish why your application was declined and repair your credit standing before making further applications.
Still Think You’re On A Credit Blacklist?
If you are reading this article is may be reasonably safe to assume you have had difficulty getting credit in the recent past. The idea of a credit blacklist that your name is on being the reason behind your problems is seductive. Unfortunately credit blacklists don’t exist and the real reason for your difficulties is probably much more mundane, you either don’t fit the lending profile of the lender you have applied to, or there is a problem with the information contained on your credit report, or a bit of both.
To deal with the former you should seek to understand and in future target your applications to lenders who may well be more interested in gaining your business. The latter is fixable, and you should waste no time in going about repair your credit.
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