How your credit rating is worked out

High street banks such as HSBC or Barclays use credit agencies such as Experian and Equifax to obtain your credit profile. Theses are the main two companies in the UK that collate information on people that can be used to judge credit worthiness.

Everything from your listing on the electoral roll, any credit judgements you have to how well you have paid back previous debts is sent over to the lender when you apply for credit. Its not credit agencies that decide if you get credit, that job is done by the lender.

Each lender will works our a set of criteria for each credit service they offer and your profile is compared against this. Lenders rarely have just one product, so when you apply for credit they will compare you against their entire range and find the one that matches you.

Why did I get turned down?

You may see an advertised rate on TV for a loan at 6.9% APR. The offer sounds great! But when you call up, you're turned down. This is because the Office of Fair Trading changed the rules in 2004 about how credit can be advertised. If a company wants to sell a bank loan at a low rate, they're going to be looking for people with good credit and rules state the the advert must reflect the rate that at least 66% of people get and because the finance industry is competitive, they do this by keeping their lending criteria strict.

Check your history

There's no such thing as  a blacklist, so if you've been turned down download your credit profile and read through it carefully. If there's anything on there that's incorrect you can apply to get it removed of updated. Credit agencies are governed by the Data Protection Act and under this law must maintain accurate information.

Never “repair” your credit

Don't be tempted to spend money with companies offering a service to wipe away you're credit worries. There's no magic bullet and only genuine mistakes can be removed from the history.  The best way to repair your credit score is to work hand at keeping your finances under control. Demonstrate that you are reliable and next time you'll stand a better chance of getting the loan.