how lending decisions are made

How lending decisions are made.

Lending decisions are not made by credit reference agencies – your credit report will not give you an “accept” or “decline” decision when you see it. The information is used to help lenders decide whether or not to accept a credit application.

Lending decisions are based upon a combination of your credit report and a lender’s own criteria. They’ll take factors such as those included in your application form into consideration and probably build a credit score. See What is my credit score?

Lenders do not have to accept your application but they do have to give you the main reason they’ve declined you such as whether the decision is based upon your credit report or their scoring criteria. If it is based upon the information held by a credit reference agency, they should give you the name and address of the credit reference agency they’ve used.

What sort of things do lenders take into consideration?
Is the information on my credit report exactly what lenders will see?
Credit report facts and fiction

What sort of things do lenders take into consideration?

That you have a good credit history and have made payments on time in the past.
That there are no court judgments or bankruptcies.
That you are not over-indebted – that you do not already have too much credit and that by lending you more, you may not be able to pay all the money back.
That they can prove that you are who you say you are – there is enough information about you to confirm that you have lived at the address and that there is perhaps some credit history already there. They are likely to look to see that you are confirmed on the electoral roll at your address and that there is a credit history to match up to what you state your address history is.
There are no indications of fraud – this might be that the information you have provided to previous lenders is consistent and there are no discrepancies between what you are telling them and what you have told others in the past.
You may also experience difficulties if there is very little information about you on your credit report.
Lenders can take credit report information about people you have a financial connection with into consideration e.g. if you share a joint account. If your “financial associate” has late payments on their report then this can affect you, even if your report shows all up-to-date information.

Is the information on my credit report exactly what lenders will see?

On the whole, your credit report should reflect the information that a lender would take into consideration but there are some differences:

Lenders may see electoral roll details of everyone who is currently registered at your address. Your report will only show your name and the dates you have been registered.
If you have court judgments you will be provided with the court and case number but lenders will not.
You will see which organisations provided the credit reference agency with information. For example, if you have a credit card, the name of the credit card provider will be shown but the lender will only see the type of organisation that provided the information e.g. bank.
Only full credit applications should be seen by lenders whereas you will be provided with all searches made of your credit report. These may be called “unrecorded enquiries”, “identity searches” and a record of the fact that you have looked at your credit report.
One important difference is that lenders may see the credit report relating to anybody you have a financial connection with and take that information into account. You will only see a list of the people you have a connection with and only they can obtain a copy of their credit report. If a financial associate has had late payments in the past, this could affect a lending decision made about you.
Not all agencies will provide you with the information held at linked addresses or other names you have been known by unless you provide these in your credit report application form. Lenders will be able to see these so it is important that you apply for your credit report with as much information about yourself as possible.
Remember that not all organisations are entitled to see all the information held about you. Companies who are not part of the credit reference agencies account sharing scheme will not be able to see credit accounts provided by others.

Credit report facts and fiction

I have a right to credit
Nobody has a right to credit. Lending is comparable to meeting someone in the street who asks you to lend them money – you would want some confidence that you would get the money back. Lenders get this confidence by checking your previous credit history and seeing how you’ve made payments in the past.

If I get declined by one lender I’ll be refused by the others
All lenders make their own decisions based upon their own criteria. Some lenders can see more information on your credit reports than others e.g. only those lenders that provide credit reference agencies with existing credit accounts can see accounts provided by others. The best thing to do before applying is always to check that your credit report is up-to-date and accurate.

If I apply to lots of different lenders one of them will accept me
Don’t make lots of applications for credit because your applications will be shown against your credit history. Too many applications may affect credit scores and make lenders think you are desperate for credit or even that a fraud is being planned. Before you apply for credit, or if you are declined, check your credit report to make sure all the information is accurate before making more applications.

I’m on a “blacklist”
There is no such thing as a credit “blacklist”. Credit reference agencies provide the information held on your credit report to lenders. Lenders then use this to help them make a decision about whether to lend to you. There is nothing held about you to advise lenders to either accept or decline your application.