In an exclusive interview with Credit Strategy, Bailey said consumers need to be properly informed why the refusal has been made when customers’ applications for mortgages, loans and credit cards are declined. This also may apply to the subprime payday and short term loans market

His comments follow an FCA paper last year which mentioned there is a confusing void of information for consumers as to why they’ve been refused a certain product.

When questioned on the issue by Credit Strategy, Bailey mooted the reasons that could be given to consumers for the refusal, stating: “Is it as straightforward as their credit reference? Is it something about the nature of the product that doesn’t fit with their information? It may be in some cases the credit reference precludes a lot of products. Is it about credit, or is it about some other aspect of the customer’s profile?”

He added: “It’s wrong to think the only thing that matters is the credit score. I think it’s likely, inevitable and sensible that the credit scoring process becomes more transparent to people. I think people deserve greater transparency.

“It’ll be interesting if you see the work that’s building up on open access; this question that comes out of the Competition and Markets Authority report, this desire for the broad access to information to allow people to have greater choice of products and how that will play out.”

Bailey added that the FCA has looked at, and will continue to make statements on, the use of big data because “some of it is undoubtedly beneficial and some of it isn’t.”

He said: “Information which is used to increase choice of products and improve risk pricing – that’s a good thing. There’s another set of information where we take a slightly different view, where firms use information about people to, in a sense, exploit their characteristics.”

Story Courtesy of Credit Strategy

Have you checked your Credit Report recently?

Did you know that your credit history may be harming your financial reputation without your knowledge. There are a few things you can do to improve the situation, even if you have made some serious mistakes in the past, you are still going to be able to repair the damage. It is recommended that you check your credit report on a regular basis even if you don’t require credit at the moment because a poor credit history can make it difficult to borrow money, get credit cards or a mortgage, or even get monthly contracts for a mobile phone or insurance.

Here are a few free credit report services you could use to start you on your road to recovery;

The main 3 credit agencies are Experian, Equifax and Call Credit. Each company you use to obtain loans, credit cards, mortgages, etc. with use one or more of these 3 to determine your eligibility.

Experian – Creditmatcher – This is a new free service that Experian (one of the top 3 credit scoring agencies) has set up. It is free but you’ll have to give them your card details for id verification.

Noddle – This is another free for life service run by Callcredit. Again, it is free but you’ll have to give them your card details for id verification.

Clearscore – This is the closest free site to map Equifax’s credit scoring system. Same mo as the others above with id verification

Now you can generate all 3 reports and a better understanding of how good or not so good your credit scoring and reputation is.

Understanding your credit score and report

If you have had problems with credit in the past, you may just assume that this history is going to be causing you harm. The problem is that until you have a clearer idea about the actual damage that has been caused, it is going to be hard to rectify the situation. So one of the first things you are going to want to do is look at your credit report – this document is basically your track record when it comes to using credit.

A credit report can be a bit confusing if you don’t know what you are looking at. It will have a list of your credit lines (sources of credit such as loans and credit cards), and your payment history in regards to this money you have borrowed. There is also a section called credit searches – if you have tried to borrow money in the last year, you can expect it to show up here as an enquiry (even if you were refused the loan). The credit report is also going to contain information that is on public record that could influence your ability to repay debts (e.g. a record of falling behind on child maintenance, bankruptcy, ccj’s, etc.).

One of the other things you are going to want to know is your credit score. There are actually a number of companies who provide credit scoring. The system used by Experian is fairly popular, and this would see a score of 881 to 999 as good/excellent. You want your credit score to be around the 700 mark, and if it is lower than this you need to take action to rectify the situation.

Repairing Your Credit

One of the first things you need to do when repairing your credit is to go over your credit report carefully to make sure there are no errors. Mistakes happen all the time, and you don’t want to be penalised for debt that has nothing to do with you. You also want to make sure that there is no evidence that other people have been creating debt using your name – if there are lots of credit enquiries recently. If you do find mistakes, you need to first contact the company that is responsible for creating it, most companies have a procedure for rectifying the situation. If you are unable to get the dispute resolved to your satisfaction, it is your right to add a note to the credit report explaining your side of things.

One of the best things you can do to repair your credit is to take action to improve your score. One of the ways you do this is by reducing the amount of money you have borrowed. You basically want to reach a stage where you have borrowed less than 30 per cent of the total amount of credit available to you. Always be careful about reducing your credit limit or getting rid of credit cards, because this makes it look as if you are using more of your available credit. It’s also not a good idea to apply for additional credit cards while trying to improve your credit score.

One of the important things to understand is that just because there is some bad stuff on your credit report now, it’s not going to make it impossible for you to get loans in the future. Even if there is something like a loan default on there, you can usually expect this to be removed within six years.

Before the crash in 2008, most of the banks would give out loans to anyone, well almost anyone. If you had a mortgaged to the hilt house or maxed out credit cards you would still get a loan, because you may have been deemed as low risk by the banks. (now credit scoring).

Then the end of 2008, early 2009, the banks decided to review their policy and stop lending (to most), as their appetite for risk had changed dramatically, which opened up the flood gates for a new breed of lender, the Payday lender.

Soon after the banks turned their backs on most of us, the payday lenders swooped in to save the day offering great loan deals which could be paid back within a couple of weeks with, what looked like, a low interest rate.

We know how the payday lender story goes as many headlines appeared stating lenders were charging over 5000% Representative APR because people were rolling their loan over month by month or missing payments then trying to catch up, etc., etc., so the government had to step in to take control of the industry and put a cap on the APR these lenders could charge, so it was set to a maximum of 292% APR and the maximum amount you will ever pay on a single loan is double the amount you borrowed, so, no more 5000%.

Now, this brings me to the present day. If you have bad, poor or adverse (however you want to say it) credit then you’ll find it even more difficult to get credit today because even the short term lenders have now changed their risk appetite, so unless your credit score is in line with their new risk appetite you won’t even get a loan from them. This could leave you helpless in an emergency if you haven’t got a friend who can be your guarantor.

However, there are still a few options you could take if you really are desperate, you could try one of the new breed of lenders for short term loans who look beyond your credit score and lend based on a more human approach, or chance your arm at a high % APR credit card specifically designed for people with bad credit.

The best option is to plan ahead with money and not put yourself in a situation where you have to get a loan, even in an emergency, but if we could all plan our lives like that, we wouldn’t be in this situation would we?