The points scheme

This is where points are awarded according to your job, salary, marital status and area of residence. Credit is given if you score enough points and the lender is happy with your previous borrowing history. If your application is refused, you can ask for the reason why and for the decision to be reviewed by the lender. Lenders may also be reluctant to give you a loan if you never had one before and if you still live with your parents, as you will have no track record of borrowing. It may be tough but nobody has an automatic right to expect credit.

Credit reference agencies

A handful of agencies gather information about you. They check whether you are on the electoral register, have any county court judgments, have become bankrupt and what your payment record is like. Details of other people living at your address may affect whether or not you are given credit. If your application was refused because of a credit reference agency's records you can ask which agency was used. You can then get a copy of the record from the agency, for a £2 fee. You can have the record corrected if it is incorrect or misleading. However, you can still be refused credit, especially if you have not kept up your payments in the past. 

Bank references

A lender can ask for a reference from your bank, but the bank cannot provide one without your authorisation. The bank may charge you for providing the reference. You are entitled to a copy of the reference given by your bank. Contact the bank if you think you have been refused credit because the information is incorrect.

A 'no credit' ring

A lender may draw a 'no credit' ring round a certain area or address, for example, a block of flats, a housing estate, or a particular street with a bad reputation and refuse credit solely on this basis. If you think you have been refused credit because you live in a no credit district, you should report the company you suspect to your local Trading Standards Department.

Be careful

You may feel desperate if you've been turned down by high street banks, but try to resist offers of credit from elsewhere. If an offer seems too good to be true, it probably is. Check the terms carefully; you may well be charged an enormous amount of interest and only add to your financial problems in the future.

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Updated: 17/10/2011