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How credit scoring works

When you apply for credit, the lender will check to make sure that you do not borrow more than you can afford. To do this, they will use a process called credit scoring to help to assess your application.

Credit scoring takes into account the information in your application and details the lender may already hold about you, for example if you already hold a bank account with them.

The process will also take into account information gathered from credit reference agencies (CRAs), which hold details about your past credit record. The lender will tell you which organisations they have used to do this.

By looking at the information going back over a number of years, a lender can build up a picture of your ability to repay any borrowing.

When a lender assesses your application, it will give points for each relevant piece of information, which adds up to provide an overall credit score. If the score reaches a level, which the lender is happy to accept, then your application will generally be successful.

It is important to be aware that each lender will have a different lending policy and they do not have to accept you application.

What if your credit card application is declined?

If your application is unsuccessful, you can ask the lender for the main reason why it was declined.

The decision could be based on your overall credit score, information from your credit record (CRAs), or perhaps because you fall outside the company’s own rules for lending.

If the decision was based on information from a CRA, you can ask for the name and address of the agency used, so that you can get a copy of the information they hold about you.

Most lenders have an appeals process if an application is declined. You should contact the lender and ask them for details if you wish to do this.

What is a credit record?

Your credit record is held at CRAs and provides a detailed report on your borrowing. It will include information about your past repayment history, any county court judgements or bankruptcies in your name, electoral roll information, current and past credit commitments and details of searches of your credit file.

This information helps a lender to decide whether an applicant is likely to be able to pay your existing debts, and to assess whether you can manage the additional credit that you have applied for.

There are three main CRAs in the UK: Experian, Equifax and CallCredit.

You can ask for a copy of your credit record by contacting any of the CRAs, at a cost of £2 for each request.

If any information in your credit report is incorrect then you have the right to have it corrected. To do so, you need to contact the relevant CRA.

Experian: 0344 481 0800
Call Credit: 0330 024 7574

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