Why those with high credit scores might get rejected

Posted by Ben Ryland in Credit Reports on 5 December 2016 - Ben is a Senior Credit Analyst at checkmyfile.

Does an excellent credit score mean you will always get the credit you apply for? Well, no it doesn’t.

When an application is made for credit, the checking of your credit file and credit score is only part of the whole credit underwriting process. So even if you have a very high credit score, this won’t automatically result in the application for credit being accepted.

So what are some of the most common reasons why an application is declined if you have a high credit score?

Number 1 is that you may have insufficient income.

Credit files do not detail your income or your job, and they do not suggest to a potential lender how much money you make. A credit report focuses on how you manage your credit agreements - do you make your payments on time, are you late with some and are others left unpaid? This helps a lender to determine the risk of the credit borrowed not being repaid. But for those with excellent credit scores who have no negative payment history, the application could be declined on the basis of income.

For example, take an applicant who has three credit cards, with a total of £10,000 outstanding across the cards. They make repayments to all three each month and the balances are not near the credit limits. This applicant would appear to be low risk and the credit score would reflect the regular payments being made each month. But while the credit score might be high, if the applicant’s annual income was £20,000, the credit card debt equates to half of the annual income. This could put pressure on the applicant’s monthly commitments if further credit was granted and so the income plays a significant part in the decision-making process.

A credit score above 750 is considered an above average credit score, but if your score is good you may be declined if you have not been credit active enough in recent times. If you have been repaying your credit agreements on time for the last 12 months but have no history prior to that, you may see your applications declined if the lender wants to see a longer period of positive repayments, even if your score is above 750.

Finally, there is no universal credit score which is used by lenders and credit reference agencies, and each score will be different. The score that is generated for you by a credit agency will give you an indication of your overall credit profile. Each lender will also have their own criteria when assessing your application and are unlikely to use your agency generated score. Instead, they will compare your file date to their decision matrix and if you don’t meet enough requirements this can cause an application to be declined, even if your credit score is high. As mentioned above this could be the income criteria which isn’t high enough even if your score is favourable.

A lending decision is always at the discretion of the credit provider and if the credit score is high but an application has been declined it is likely the reason is non-credit file related. Just remember, credit is never a given and no one is simply entitled to credit from a lender.

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