what to do if you cant find why you fail a credit check 19 December 2021 at 1:43PM in Credit file & ratings 7 replies 482 views

nicke20

whilst im locked out of my credit club (another post) ive signed up to clear score
I ditched vodafone recently (two contracts) and took out ee payg sims, my partner wanted to go back to vodafone so i started a new and better deal contact for her (on our joint account) and i decided to stay with ee and upgrade to a contact (£16 a month) I failed the credit check. So clear score give me a score of 996 out of 1000 and i cant see any thing that would flag against me, what next?

[Deleted User]

Ignore the score.

Lenders assess you on your history and circumstances. They either found something they didn't like, or your not meeting their criteria.

Check all three files, not just Equifax.

A_Random_Man

I'm afraid there is nothing you can do other than apply somewhere else. 

Catsacor

I would spend a long time studying your information there, critique that file, go into it in detail, study each and every page.

As already mentioned, it's the detailed information that lenders are seeing, the whole of your money management and not a score number. 

You are being assessed you are not being number studied.

Catsacor

@nicke20 have you got any answers to the situation yet ?

nyermen

TL;DR - it's not just about credit score, thats a big part, but there are other elements.

When you factor in a proper cost of lending there's more to it.  Sorry for the detail, just for those who are interested...
Part of the problem is they're normally called a "credit check" when the more realistic term is probably "profitable lending decision".    Lenders set their lending criteria - sure, a lot of that is risk of not repaying, but lenders will be thinking beyond that - might they repay early (loss of profit), etc etc.  

A bit of insight from my experience - there's something called Funds Transfer Pricing / FTP - not to be confused with transfer pricing used by starbucks that made the headlines - FTP is used commonly by eg. banks to gauge the commercial margin on an asset, and so understand how funding contributes to profits (among other things).
FTP includes elements such as:
- Borrowing the money they're lending (Cost - eg. interest payments to savings?  interbank lending? etc.)
- The credit margin (difference between risk of lending vs a risk free rate such as sovereign bond)
- Optionality (what if borrower repays early if allowed?  Loan is funded but no longer lent)
- Liquidity margin (cost of liquidity - eg. Basel 3 LCR requires easy access assets such as cash to be held as a % of lending.  This means that for each loan, more money is borrowed to put aside but that money earns very low or even zero interest)
- Regulatory margin (cost of compliance - eg. Basel "2" costs such as RWA (which means similar to basel 3, money put aside in liquid assets to cover "risk weighted assets")
- Other lending costs (processing, staff, etc)
There are other factors, that can depend on the bank but the above are pretty core to all FTP calculations.

If all the above results in a poor or even zero/negative commercial margin (the delta vs the interest margin), they would be unlikely to lend as they could make as much commercial margin just sticking their cash on the money markets (exceptions of course - eg. trying to enter a new lending market)

They're thinking about all the above over large portfolios, not a few loans of course.  And I'm not considering all the free money that central banks have splashed about that quite frankly means the borrowing element should be tiny (sometimes calculated as a "term rate" for those who know the meaning)

(Disclaimer: the above is my own opinion based on knowledge learnt from a previous role in my company where I implemented FTP software alongside regulatory compliance systems.  Hence some of my posts also talk about credit scoring etc as these form part of basel calculations as "probability of default", the market may have moved on in the last few years since I stopped)

Vinknut

Double-check both your credit file at all 3 agencies, but also the details you put on the application form.

If you've messed up the application form, or if there's something incorrect or inconsistent on your credit file(s), then the credit score is irrelevant.

MEM62

nyermen said:

TL;DR - it's not just about credit score, thats a big part, but there are other elements.

Errrr.... No.  Your credit 'score' is not a factor in lending. In fact, it is not even seen by the lender.