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- I have had 2 personal loans for consolidation turned down within the last 2 weeks. I have been told that it is due to a poor credit rating. However I have since obtained 2 credit reports from Equifax and Experian, which both show that I have an excellent rating. I even appealed to Tesco Loans on this basis, and including the reports within the appeal letter, but I still got refused. Why is this and what rights do I have with finding out the exact reason as to why they failed me? I can never seem to get a straight answer, and just keep getting told that it’s the system that makes the decision.
- As you will be aware from the press, lenders are taking a much more conservative approach to lending than before the credit crisis and you may be a victim of this tightening up. Having said that credit decisions are generally made using a combination of four things - the information in your application form, information obtained from a credit reference agency such as Experian, Equifax or Callcredit, the lender's scorecard and the lender's policy rules - e.g. you are not on the Voters Roll or have been at your current address for a very short period. It therefore may not be obvious from your credit report alone why you have been turned down.
Lenders are forbidden, by both the Office of Fair Trading and the Information Commissioner's Office, from telling potential borrowers that they have been turned down because of adverse information on their credit file when this is not the case. You say that Experian and Equifax have given you an excellent rating - the agencies do not rate individual applicants - the rating and the decision is individual to each lender and is that of the lender. Any score that the agencies may have included in your file is for guidance only.
I note that you have now applied for credit at least three times in a short period - this will have a significant negative impact on your rating which will take time to repair. I also note that you are applying for consolidation loans which indicate that you may already have a significant level of borrowing which you may be having difficulty servicing even if you a not in arrears or serious arrears - this too will affect your rating. Consolidation loans are generally much higher risk than other loans and hence the lending criteria are generally tighter.
Lenders are required by the OFT and the ICO and their own codes to give some indication of why they have turned you down provided this does not disclose commercially confidential information e.g scores for individual characteristics or policy rules - for obvious reasons disclosure of such information could lead to manipulation of future applications. There is therefore unlikely to be an"exact reason" why you have been turned down - rather a combination of factors means you do not meet those lenders' criteria. You should try not to apply again for credit in the near future - perhaps up to the year it will take for those searches to disappear from your file - to do so will merely exacerbate the problem you already have.
If you are struggling or know you are going to be struggling soon perhaps you should talk to your existing lenders or to one of the many advice agencies that are there to help. - I have got myself in a right mess with payday loans. I owe £1,350 to three different payday lenders. I am struggling to juggle these debts and have been for months. How do I resolve this?
- Once you start to miss agreed repayment dates or begin to re-schedule payday loans then the interest rolls up at an incredible rate, probably at an Annual Percentage Rate (APR) of 1,000% or more. Breaking the cycle is not easy, but borrowing more shouldn’t be an option, as you have loans out with three brands already. Looking at the headline rates they are: PaydayUK (1,737%),
If you borrowed £250 on PaydayUK (MEM Consumer Finance Limited) then their site says that you repay £312.50 provided you have repaid the debt by the next pay day. I note from their site that they make some strange claims, notably:
‘Rebuilding your credit rating'
As soon as you repay your loan on your payday, we will report that to the credit reference agency, so that they will know that you have repaid your loan. This will help to rebuild your credit rating, as the credit referencing agency can see that you have repaid a loan. We will report this every time you take out a loan and repay it to us. As you gradually improve your credit rating, you will find that you may be able to borrow larger amounts from us and apply for other financial products that you may have been refused for in the past.
However, if you do not repay your loan and fail to contact PaydayUK, this will also be reported to the credit referencing agency, which may have a negative impact on your credit rating.’
On this basis they will report adverse information that may impair your credit file if you miss contractual payments and there is limited debt forgiveness as there can be with a longer term credit agreement when you miss one payment. You should take advantage of our free credit report facility to check your file. You may need to check all 3 agencies (i.e. Experian, Equifax and Callcredit) because these companies do not necessarily file information with all of them. As PaydayUK’s site confirms, they check your credit record in order to make a decision as to whether to lend to you. This would leave a footprint on your credit file, but only on the credit reference agency they use for underwriting purposes.
PaydayUK is a member of the Consumer Finance Association and their guidelines state:
“Make sure you understand if there are additional charges should you fail to make a repayment on time. You need to know how much these costs are, and how they will affect your circumstances. Again, if your lender does not make this crystal clear – look elsewhere!”
Having looked at the site and having read the ‘payday loan conditions’ and ‘our charges’ pages on the site I am unable to confirm what the penalties are for not keeping up with repayments, though the site generally looks fairly compliant. I note there is a loan deferral option, but it is unclear what the charge for this is.
QuickQuid offers a variable rate based upon your risk profile – this ranges between 819.12% and 2,222.46% with repayment up to 2 payday cycles. You can extend your loan a maximum of five times, which are when things get really expensive.
The typical APR on Wonga is 2,689% and I note that you have borrowed well in excess of their first advance figure of £400. Wonga do have a section about failed payments and their charges and accrued interest on their site.
Payday loans are absolutely the final stage before taking professional debt advice. You may have other debts to pay, some of which may be priority creditors. I note that Wonga promote service for borrowing money to pay priority creditors like council tax. If you are at that stage then you need a debt solution. The relatively low level of debt involved may govern what solution is best for you. - My father has run a debt up on a credit card via cash withdrawals. He didn’t really understand that he would be charged for this and now has a debt which he can’t pay back as the interest is so high. Is there anything we can do?
- Cash withdrawal interest rates are very high if the withdrawal is not paid back quickly. It would appear that your father needs to take advice, probably face-to-face with someone able to look at the credit card statements to understand the true picture of his finances. Creditors are not that forgiving where extensive use of a credit facility has been made and then someone turns around and says that they can’t afford to repay the debt when there circumstances haven’t materially changed in any way. Once a dialogue is opened with the card issuer the credit facility will effectively be frozen or withdrawn. Consideration may be given to whether your father can afford to make regular monthly payments with a lower interest rate, many lenders are now doing this to reduce their risk exposure. If it is the case that your father is only able to make token payments to his unsecured creditors and he has a number of them then it may be worth talking to Debt Management Company. Your question implied that he had only one credit card – which would probably rule out a formal Debt Management Plan or IVA. My advice would be for your father to take professional advice in the first instance, whether this is from a debt advice charity or a reputable debt solution provider. The initial advice is free from both. There will need to be dialogue with the credit card company very soon either directly or through an appointed advisor on his behalf.
- Can you help me with my credit card debts?
- We can help you with your credit card debt problems, as well as your other debt liabilities, by offering advice to help resolve your current financial difficulties.
- My friend was sold a secured loan at the age of 69 to last 15 years. He borrowed £44,000 and they want at least £66,000 to clear. He is desperate to retire. Other than to sell or home reversion, does he have any other choice?
- A Debt Management Plan or an IVA wouldn’t assist with the Secured Loan. If your friend wants to stay in his property then you are really looking at either a lifetime mortgage (equity release) or sale & rent back. Both would require a meeting with a specialist financial advisor and would require that outstanding secured borrowing can be cleared as part of the transaction. I am not clear why the redemption figure is so high, this may need to be reviewed, as it looks excessive. Both of the options proposed would reduce monthly commitments, potentially providing some offset to the loss of income from retirement.
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