Refused loan - Advice

captainharris

Hi All,

I recently applied to Santander for a personal loan of £8k to pay for used car (and a few bits for the house too).

I had never actually checked my credit score in the past and never thought I would be refused as I always 'thought' my credit history was good. I earn £25k a year, I have no outstanding loans/credit/store cards i'm 28, never been in the red and always paid my bills on time (including credit).

After finding out I had been refused I checked with credit expert which said I had a 'poor' (680 score) rating due the fact I had opened two credit accounts within the last 6 months (only for relatively small amounts - £250 and £500). one of these was actually just a shop direct account as I got £30 off a £60 spend if I opened a credit account - I didn't actually want the credit I just wanted a bargain!
There was me thinking I was being good with my money!

Anyway. I just wanted to check if anyone knew how long it's likely for this to correct itself and also if I was to write to the lender to explain in greater detail the history of my 'perfect' past credit history (in terms of payments on time etc). would I be more likely to get a positive response if I can demonstrate my ability to pay and the reasons behind my current poor score, rather than them just looking at the score and instantly saying 'no'?

sariebeth

Hi there,

Firstly I would ignore the 'credit score' as these mean virtually nothing and are not worth the £6 cost! I think it's a bit harsh that you have been refused because of 2 other applications in 6 months, as it's usually more like 2-3 applications in 3 months that get flagged.

Have a look through your credit report, just to make sure there are no mistakes on it (I had to get a £16 'default' removed that i knew nothing about, I think O2 made it up). Then make sure that you are on the electoral role at your address. Also check that all of your open credit accounts i.e. bank, mobile, tv, internet etc are registered to your current address. The leave it 3 months and apply again - you should have no problem. If you can wait, leave it for 6 months then previous applications barely register.

I don't think it's worth trying to explain to Santander as 'comuter says no' and real people with real decision making powers don't exist these days!

BoGoF

As has been said your credit score means nothing to the lender, they don't see what the credit reference agency 'scores' you, they have their own scoring techniques.

That said, 2 recent credit applications in a short time is not a particularly good thing in the eyes of a lender.

You said you have no outstanding debt. Apart from these 2 recent ones what else credit wise you have had in the last few years. It may be the lack of history counting against you.

captainharris

BoGoF wrote: »

As has been said your credit score means nothing to the lender, they don't see what the credit reference agency 'scores' you, they have their own scoring techniques.

That said, 2 recent credit applications in a short time is not a particularly good thing in the eyes of a lender.

You said you have no outstanding debt. Apart from these 2 recent ones what else credit wise you have had in the last few years. It may be the lack of history counting against you.

I have had a British Gas account that is now 'settled', a shop direct account that has a £0 balance as everything is now paid up (is it best just to close this? - i've been told its best to keep it open at £0 as it proves I can 'keep good credit'), I've got an o2 account which is currently at £0 balance.

Other than that the only thing that is showing up on the credit check it two bank accounts both at £0 balances but both have small overdraft limits (which i've never needed to use in 10 years as i've always had my current account in credit).

Like I say, i'm a bit baffled that one new small catalogue account has knocked me back. But the credit expert website has a big red exclamation mark telling me I have two negative factors- 1) I have opened two new credit accounts in 6 months. 2) As they are new, I haven't proved I can manage them.

BoGoF

You're British Gas account doesn't count as 'credit'

Nobody is saying (apart from Credit Expert) that it is these 2 small catalogue accounts that have caused a rejection - don't get too hung up on their exclamation marks!!!

By your admission you have had little or no credit in the last few years and, these days, it is difficult to jump from that position to a £8k loan.

You need to 'build' a credit history and if that means starting off with a smallish credit card limit then that's what you need to do. There's plenty advise on this site on how to improve your credit rating (not score)

captainharris

Although after speaking to someone at Credit Expert they advised me not to touch anything regarding credit for at least 3 months as this would only make things worse. So, getting a credit card is completely out of the question for now - at least for a good few months anyway. I wish I had been a little more savvy with how the whole credit system works beforehand as I've always been incredibly careful with money - and tried to stick to a principle of 'only pay for it if you have the money'.

It seems like a mountain to climb to only now start building a decent credit history - which is why i was wondering if it would be better contacting the lender direct and having a conversation with them, whether that would help much.

BoGoF

I would suggest having a read at this

http://www.moneysavingexpert.com/loans/credit-rating-credit-score

You would probably still manage to get one of the 'credit building cards', Vanquis or one of the Capital One cards. If you do just make sure you pay in full every month as they do have high APR's.

With regards approaching the lender direct, I don't see the point. Some people have reported success when appealing decisions but at the end of the day you have no credit history and to try and get a loan for £8k is probably a step too far at this moment.

chanz4

I would appeal the decision, show them 3 months bank statements etc and it may over turn. But lenders dont always worry so much about searches