Credit check 'negatives'

[Deleted User]

Hello all, first-time poster here, although I've been browsing this site and the newsletters for some time.

Sorry in advance if I've posted this in the wrong place.

I'm a potential first-time buyer, but had my first attempt at applying for a mortgage declined this morning, which has set me off on a trawl of my credit check via Experian.

To be honest, the main reason for the refusal was my fault - I wasn't on the electoral register for the property I currently rent a room in. I should have checked with the landlords beforehand.

But one of the other negatives on my Experian report really struck me as oddly convoluted, and I wondered if any forum users had any advice on solving it.

The problem is 'You have no successfully settled non-mail
order accounts.'

I called Experian to get an explanation of what this means. If I'm interpreting things correctly, it means lenders like to see that applicants can successfully borrow money and settle their debt. I've had one credit card for ages, but because I’ve never had one then paid it off and closed the account, I don’t have any proof on my credit rating that I’ve successfully settled an account.

I asked the Experian advisor if, in theory, I’d be better off closing my Barclaycard (which I pay off every month) and then getting a new credit card to show that I’ve managed credit. They said possibly – but only after six months, because when you start a new credit card your rating initially goes down before it goes up...

But also it seems that if I just closed my Barclaycard account to prove I had settled an account, but didn't open a new one, the lenders would think I wasn’t any good at managing credit and that's why I didn't have a credit card!

Anyone been in a similar muddle and found a way to beat it?

BobQ

Its a common problem, well known to those who need credit and totally absurd in my opinion in that it penalises those who are financially responsible.

You just need to play the game and do the things that the financial services industry expects. Its a sort of training programme in which you need to behave as they expect by taking on some credit and not paying it off immediately.

InsideInsurance

Paying it off immediately is not an issue, it is due to not actually "completing" an agreement (ie closing an account)

Obviously it fits much better than with loans than it does credit cards but ultimately closing either will show you are able to see things through to the end and ultimately pay it off and close it.

Ultimately every lender has its own policy and no one has a definitive answer on what is best to do because "it depends" and the logic for underwriters tends to be fairly complex with the aggregate being more than just the sum of the individual parts.

Tixy

Whilst experian lists it as a negative - it doesn't necessarily mean a potential mortgage lender will consider it a major issue.

Just as an aside and your probably wouldn't, but don't be tempted by something like a payday loan company who advise a payday loan could help your file (because you'd then be showing a settled account) - it definitely wouldn't.

If you are wanting a mortgage very soon I would probably just keep the account you have open.

[Deleted User]

Thanks all. Something I've just thought about – I did have an MBNA credit card and a clothing company store card that were closed many moons ago – probably about ten years – but I'm guessing that Experian wouldn't take those into account, even if I dug out evidence of their existence. I've probably destroyed all paper traces of them by now.

DevilPigeon

thepasty wrote: »

Thanks all. Something I've just thought about – I did have an MBNA credit card and a clothing company store card that were closed many moons ago – probably about ten years – but I'm guessing that Experian wouldn't take those into account, even if I dug out evidence of their existence. I've probably destroyed all paper traces of them by now.

Settled accounts drop off your files 6 years from the settlement date

AlexLeigh

If you've got empty credit cards or catalogue accounts then close them.

The more "empty" credit you have, the more money you can get in debt, without the need of further applications. These things are a worry for any potential new lenders.

[Deleted User]

Thanks Alex and everyone else for advice.

Having signed up for Credit Expert yesterday in the wake of my unsuccessful mortgage application, I contacted Experian and asked them to tidy up a few loose ends on my report.

Although I appreciate that the credit agency's score is only a very small measure of credit-worthiness, overnight my score has gone up from 841 to 921, and from 'fair' to 'good'.

One of the three negatives against my report has been remedied - the store card I mentioned earlier was closed in 2007, so still counts as 'settled credit' under the six-year guideline.

Today I've asked Experian to tidy up the timeline of addresses I've held in the past; at all-but-one of them I've been registered on the electoral roll, so when my current address is also registered in a few months, it should provide a more thorough account of my history and increase my chances.

Not that I'm counting my chickens...