What if someone says 'no' to your loan

Your loan or mortgage application has been turned down, despite your (to yourself) evident earnings ability to meet repayments. Why?

The lender has checked the system and discovered an adverse credit rating against your name, a financial blemish you were possibly unaware of or had long forgotten. Such a poor credit rating shouldn't ,though, prevent you from borrowing the money you need; but it will make it more expensive.

Unless you're a convicted credit felon of epic scale, it's always possible to borrow money if you provide security and / or meet the higher interest charges.

Achieving an adverse credit rating is easy if done deliberately but it's not difficult by accident. Missing a credit card payment or two, non payment of a utility bill in the confusion of divorce and changing address; these and other financial mishaps can clock up on your credit record and put you in the sub-prime category where borrowing is concerned.

You don't have to be young and in a low income bracket to be at risk to adverse credit labelling. Research by lender GMAC-RFC shows that nearly 75% of people who have to opt for a sub-prime mortgage are in the 35-54 age group while the findings of BM Solutions reveal that the average annual salary of a borrower afflicted with the adverse credit tag is £30,000.

For many people, failing a lender's credit scoring check may provide the first clue that they have a problem. Remember that county court judgements (CCJs) can be granted by a court in your absence although you should have been notified of the proceedings; it will remain on your credit record for six years. Also note that your credit rating could be further blackened by repeated attempts (and rejections) to obtain loans at prime rates.

Have you been turned down? You could still get a credit card.

Check your credit rating

First of all, keep tabs on your credit record and eliminate the potential for nasty surprises when you submit a loan application. The lender, when rejecting your application, does have to tell you which reference agency was used to determine your adverse credit rating. But under data protection laws it cannot tell you what the particular credit problem is; you approach the agency to request further information.

You can contact credit reference agencies to amend any credit details that are incorrect and you can put a note on your file to explain any mitigating circumstances, for instance a divorce, which have affected your credit standing.

Is your credit record correct? Check your credit reference, credit file, credit score with CreditExpert from Experian.

You may find a loan is not forthcoming if you have a low credit score, despite being financially secure with no adverse credit history. The low score can be the result of failing to maintain regular employment or a fixed address. Ensure, too, that you are on the electoral register of your local council.

14 September 2007 © Moneyextra.com

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