Campaign to Force Companies to disclose reason for refusing credit

draconian_2

I have read through this and it made me remember when I wanted to get just a cheque gurantee card.
The history is that when I was divorced my Barclaycard was defaulted through all the kerfuffle of the divorce. Anyway it is still being paid off but the debt is not on file as its older then 6 years now.
I applied for a cheque card with Woolwich - my credit file is very good and I havenot been refused anything I have applied for in the last 12 months which included a loan for a £35k car - which I never took in the end!!
So getting a cheque card should not be an issue!
But I was rejected.
I wrote Woolwich a letter and asked why I cant get a card - they said "computer says no" but I wrote back and said that in light of all the successfull credit apps I have had they made no sense!
I got a letter back saying they had taken a look at it again and yes I could have one.
I have not been overdrawn more then 2 or 3 times in 7 years and I have always paid everything off in that time as well.
The point about bcard - was I think some info sharing was going on as Woolwich are now being dissolved into Barclays - but when in my second letter I asked what do they know that I dont and under the relevant rules I am entitled to see what they have about me - they changed their mind.

Ho Hum!

rjm67

roswell wrote:

if computer says NO then person entering the data says NO, its not the person that makes the decision and thats why they suggest you check your crddit file.

Out of interest if its a lender you are already with its most likely that although they love yyour loyalty your becoming to much of a risk for them.

I can see your point on that one for some cases, except in this instance I would have had less total debt with them than when I took out the initial loan, on a lower salary with less disposable income.

rjm67

draconian wrote:

I have read through this and it made me remember when I wanted to get just a cheque gurantee card.
The history is that when I was divorced my Barclaycard was defaulted through all the kerfuffle of the divorce. Anyway it is still being paid off but the debt is not on file as its older then 6 years now.
I applied for a cheque card with Woolwich - my credit file is very good and I havenot been refused anything I have applied for in the last 12 months which included a loan for a £35k car - which I never took in the end!!
So getting a cheque card should not be an issue!
But I was rejected.
I wrote Woolwich a letter and asked why I cant get a card - they said "computer says no" but I wrote back and said that in light of all the successfull credit apps I have had they made no sense!
I got a letter back saying they had taken a look at it again and yes I could have one.
I have not been overdrawn more then 2 or 3 times in 7 years and I have always paid everything off in that time as well.
The point about bcard - was I think some info sharing was going on as Woolwich are now being dissolved into Barclays - but when in my second letter I asked what do they know that I dont and under the relevant rules I am entitled to see what they have about me - they changed their mind.

Ho Hum!

I really like this point draconian. I might even write and ask them what they hold on me.

rjm67

ohmsoft wrote:

I do think we often forget that lending institutions are (mostly) buisnesses intending to make a profit and as such are entitled to make a commercial decision on who to lend to. Often this criteria is confidential (and in the case of suspected fraud, legally privaliged).

Like others have said, the complex nature of credit scoring does not lend itself to providing reasons all the time - if they did I think there would be a risk of the exact lending policies becoming public, pieced together like a jig-saw puzzle. There is an argument that this should happen - but I think it would drive down competition as the criteria would have to become more prudent.

I therefore voted - no

I can see some of your point, but there is also the fact that lenders must not refuse you credit based upon such things a postcode blocking. I'm not saying that each company isn't entitled to use it's own scoring system, but it should give you a specific reason why you've been refused. It's like going to the Doctors to be told you're not well, but not what the cause is. How do you get better if you don't know where to start?

rjm67

MSE_Martin wrote:

I have a lot of sympathy with this idea - yet it would mark a fundamental shift in the way companies operate.

The thing to remember is the fact you've been rejected doesn't mean there's anything wrong. It means they dont want you as a customer. Of course this may be because you're seen as a bad risk - but it may simply be that it doesn't want you because you won't make it money. If you read my latest credit scoring article you'll see examples - e.g. the company wants mortgage customers so it scores its current account applicant on how likely to get a mortgage they are.

Martin

I do fully accept that it might be that they won't make any money Martin, but then tell me that's the reason. I have no problem with that being the reason either. In fact I'd love to know that it was for this reason. As it happens, I will be settling my loan with them three years early this year, so they will lose out on a lot more money from me as well. I'll just have a mortage by the end of this year, having cleared just over £20k of loan and credit cards in just two years. Thanks in no small part to this site.

Rafter

Of course they can't tell you!

If your credit report is ok, then the statistical models that that particular organisation use can reject you for a number of reasons including some of those mentioned above:

The kind of profession you are in and how long you have been in your current job.

Whether you are self employed.

Whether people who live in your street are more likely to default.

How much available credit you have already versus your disposable income (not just gross but how much after bills, mortgage and existing debt servicing).

These measures vary by banks - they don't disclose because it would be illegal as the information is commercially senstive and would be anti competitive.

R.

MSE_Martin

I actually disagree with the poll - but dont worry - not for the reasons you think.

I think companies should be forced to make the credit scoring process transparent. You shouldn't just be told "why you were rejected" they should have to publish "which customers will be accepted" then you can avoid poor applications and have legitimate expectations.

Martin

Rafter

Martin,

Quite agree, nothing wrong with transparency at application.

Danger is if all the banks found out how each others scorecards worked that prices overall would rise.

It is all about pricing for risk and what risk a particular bank is prepared to take on the basis of knowledge about similar existing customers.

I think banks have got themselves into writing off over £7 billion of debt this year because they have relied too much on their systems rather than common sense.

Someone earning £30k with £30k on credit cards probably isn't a good bet. Problem is if that isn't given the right weighting on the scorecard and they have kept up with payments so far, live in a decent postcode area etc they may well have been offered a loan.

Now banks are more cautious which in the medium term should mean cheaper credit for all.

R.

rjm67

I might be being thick here Rafter, but why would prices increase if each business knew how every other one scored? Wouldn't they use them to imporve their own scoring and products. Given that it's only human beings who devise these scoring systems, surely transparency would result in better scoring systems and lower priced products because the companies would have more accurate information to work with. The risks for them would be lowered.

miha_2

rjm67 wrote:

Hi All,

Having been refused credit for the first time in my life recently (I have a very good record, and I'm an existing customer??), I feel that companies should be required legally to tell you precisely why they have done so, and give you the chance to correct it if appropriate. Whilst I accept that you have no right to expect credit, if they refuse it, there should be a precise reason why. How can people improve their credit rating if they don't know why, or complain if the process being used is illegal or unjustified.

If anybody else feels the same, would they give their support in my poll?(Perhaps this could be made a sticky?)

Any other comments would be appreciated. I don't intend letting the organisation concerned get away with their vague answer, and I'd like to push this one further in general.

P.S. I've contacted the law society, and I'm going to try my MP and the FSA.

I aggree

can someoane explain me how one of my house mates has open an account with Barclays for the fist time ever with any bank and get a full visa card, and I which bank with them for 2y and 8m i still have a lausi visa electron which CANNOT BE UPGREDED????

I am swiching coz this is ridiculos.