Article by Sam Griffin - 17th August 2021

Declined With An Excellent Credit Score - Why?

Reaching a high Credit Score is a goal that everyone with a sense of financial ambition seems to be chasing. From financially focused professionals to students just starting out and everyone in between, we want to bump that number up just a little bit more.

And it’s no mystery why. Good creditworthiness often opens doors that would otherwise remain locked shut: easier access to loans, a larger selection of eligible products like exclusive reward credit cards, a higher chance of securing a mortgage, and cheaper interest rates are just a few benefits that you can enjoy.

One thing a high Credit Score cannot do is guarantee a successful application. That means even people with seemingly maximum Scores and high levels of wealth or financial assets can still be declined. In fact, wealth plays no part in the calculation of your Credit Score. The reasoning behind a potential lender’s decision can be tricky to uncover and, when you have an apparently good Credit Rating, a rejection can seem even more mind-boggling. You can spend hours trying to unearth the answer but, like an archaeologist wandering through a sandstorm, you might just end up even more lost. Thankfully though, a little guidance is all it takes for a lot of clarity.

What does a Credit Score actually mean?

Before diving into some reasons why you may have been declined despite having a high Credit Score, it’s important to point out exactly what that little number means.

A Credit Score is a useful measure of your Credit Report’s overall health. The higher, the better. In theory, an individual’s Credit Score shows the likelihood of a new credit account entering default status – something potential lenders desperately want to avoid.

Scorecards (how Credit Scores are calculated) have come a long way in 60 years. Initially developed in 1956 by Americans Bill Fair and Earl Isaac (who together established FICO), the calculations behind Credit Scores have grown into increasingly sophisticated algorithms that can accurately distil an individual’s borrowing behaviour into a single number to reflect their likelihood of default.

A Credit Score isn’t a metric of your definite approval chances nor does it reflect your wealth or purchasing power.

As Credit Scores are calculated using so much information – from account repayment history to Court Records and Electoral Roll listings, to name just a few – they can be useful for easily and quickly assessing your creditworthiness. If you’re looking to find out exactly why a potential lender has declined your application though, you’ll need more detail than the Credit Score alone.

Your Credit Report holds the data on which your Credit Score is calculated, so if you’re looking for influencing factors that led to a rejection, checking your Credit Report should point you in the right direction.

It’s also important to highlight that the Credit Score you get will differ depending on where you see it and which Credit Reference Agency (CRA) it is based on. There is no one true Score. Credit Scores are calculated based on unique scorecards, which analyse the data that particular CRA holds about you differently. As both the scorecards and Credit Reports are different, you inevitably end up with different Credit Scores from each CRA.

So which Credit Scores do potential lenders check when they assess your application? None that you can see. They won’t access the specific Credit Scores you’ll have seen. Instead, they will apply their unique lending criteria and analysis to your Credit Report from one of the CRAs. They may receive a ‘Bureau Score’ from a CRA to aid their assessment, but this Score still won’t be the one you see when checking with the CRA directly.

That said, your Credit Score is still a highly useful indicator as to how a typical lender will rate you. Uniquely, your checkmyfile score takes all of the information held by all three CRAs and translates that into your checkmyfile Score – removing the need to juggle multiple different scores on different scales.

How do lenders and other organisations come to a lending decision?

Exactly what a lender looks for when assessing your Credit Report will be different from one to the next, as they all have unique criteria and appetite for risk. Often this criteria is somewhat volatile and prone to change, so a particular lender approving your application in the past isn’t itself a sign it’ll definitely happen again. The reverse is also true whereby being declined by a lender doesn’t preclude you from being eligible for acceptance in the future, providing you meet its criteria next time around.

It’s also important to remember that Credit Reports and the data they consist of are constantly changing so your creditworthiness will move too. In general though, a Credit Report that demonstrates you’re a reliable payer will make you attractive to potential lenders.

Looking at historic repayment behaviour is one of the most reliable indicators of future repayment behaviour so a lot of consideration is given to how past accounts have been managed. A consistent trend of payments made on time will reassure a potential lender that you’re more likely to meet any payments as they fall due.

Your Credit Report will show you which accounts are contributing to your overall creditworthiness, how long they’ve been open, and the current balance, as well as Court Records, Financial Associations, and recent Credit Application Searches, so there really is a wealth of information on your Credit Report.

Common reasons to be declined with a high Credit Score

If you’ve been declined even though your Credit Score seems to be top notch, there are some common offenders you should keep an eye out for. These are important factors that can affect your application and the lender’s decision, but do not influence your Credit Score. Please note though that the only ones to know exactly why a lender declined your application is the lender itself.

Financial Associations

A Financial Association is another individual with whom you’ve had a financial link. These can be spouses or family members and the connection is often made following a joint application for credit. Ex-flatmates can also appear as Financial Associations if you both paid the electric/gas/water bills.

These Financial Associations don’t affect your Credit Score at all, as your Score is based solely on your own information, but they can still influence your applications.

If you check your Credit Report, it will have a dedicated ‘Financial Associations’ section that will list your known associates. Here you can see anyone currently linked to you, the company that made the link, and when it was created. You won’t actually see their Credit Report data at all (just as yours won’t be available to them) and the entry won’t change your Credit Score because your Score is only calculated on your own information.

Importantly though, while you have a Financial Association, their Credit Report may be viewed alongside yours by a lender during the credit check process whenever you make an application. As such, if the Financial Association’s Credit Report holds negative entries like late payments or defaults, for example, the entry may harm your chances of being accepted.

Financial Associations remain on Credit Reports indefinitely. This means people checking their Credit Reports for the first time in a while often find old partners or ex-flatmates lurking where they shouldn’t. This is very common and, providing there isn’t any active joint information between you any longer, the link can be removed.

You just need to contact the CRA that holds the Financial Association and request they take it off. Normally this involves checking all of your Credit Reports from the three Credit References Agencies and contacting each CRA individually, but checkmyfile can handle this for you.

We routinely raise these disassociation disputes on behalf of our customers with the Credit Reference Agencies. If this is something you’re looking for, you can try us free for 30 days, then just £14.99 per month, which you can cancel easily at any time. Our Multi Agency Credit Report has complete information from all three Credit Reference Agencies and we can raise disputes with any that are reporting incorrect or out-of-date information.

You can easily submit the disassociation request through your account but if you need any guidance, please let one of our professionally qualified Credit Analysts know by freephone, email, or secure message.

As Financial Associations don’t increase or decrease your Credit Score, it’s possible to have a very high Score while still having these entries harming your applications. Checking your Credit Report will let you spot any of these entries quickly and with full detail, whereas relying solely on the Score will have left you none the wiser.

Employment Status and Inconsistent Information

A major determining factor for potential lenders is whether their applicant can repay what they’re looking to borrow and – importantly – that this reliability won’t change later on down the road.

Checking your employment status is standard procedure for lenders, especially for larger applications like mortgages. Your employment status (much like your salary) is separate entirely to your Credit Report so it’s possible to have a shining Credit Score and still find it hard to be accepted based on a questionable employment status alone.

As lenders hunt for the most financially stable customers, an employment status that demonstrates reliability will reflect best on you.

Details provided as part of the application, such as your employment status and income, are often shared by lenders with anti-fraud organisations like National Hunter. Inconsistencies between applications – like providing a £20,000 salary on one application and then £250,000 on another – can be flagged up during the application process, giving the lender reason to doubt the legitimacy of the supplied information. Dishonesty like this can result in a failed application, regardless of any Credit Rating, and may continue to cause trouble with future applications too.

Providing you answer all questions to the best of your knowledge, there is no reason to fret. These checks are designed to catch people who are deliberately trying to trick a lending institution.

Negative Markers

There is a host of negative entries that can feature on a Credit Report that bring down your chances of a successful application. Anything from a missed payment to a bankruptcy can be recorded against you, and each one can lower your overall creditworthiness with different severity depending on the seriousness of the marker.

While severe negative markers like defaults and County Court Judgments will almost certainly have a noticeable impact on your Credit Score, some of the more minor ones (like single late payments) may have a negligible effect on the number itself. Their presence though, however numerically minor, can still worry some lenders. It’s therefore possible to have a strong Score but still have a negative marker or two.

As all lenders have their own unique criteria they need to meet when assessing applications, some will naturally be more stringent than others. Some low-risk lenders, for example, may have automated credit check processes that disqualify any applicants with even a single negative marker.

And again – you can only know for certain what’s on your Credit Report by checking yourself.

Total Volume of Existing Debt

While your creditworthiness is how likely you are to repay what you borrow, your total outstanding debt will also be assessed, which factors into your affordability. It’s very possible to have a high Credit Score while giving lenders concern due to outstanding balance alone. As your income isn’t held by the Credit Reference Agencies, it won’t factor into your Credit Score at all.

Potential lenders though will have details about your income because you’ll have supplied it on the application.

They can then mark your income against your existing debt and outgoings to see whether or not you can comfortably meet the agreed repayment terms. If there’s concern that the account you’re applying for, combined with your existing financial commitments, will strain you, they may decline the application.

Having a high Credit Score may not be enough to be accepted if the potential lender finds your affordability too low.

Check out more on creditworthiness versus affordability in our guide.

A mix of all these things

In practice, it may not be a single factor that has led a lender to reject your application. It could be a small amount of each of these mixed together that tips the odds against you.

By knowing what to look for and where the most important information about you is held (it’s on your Credit Report), you can ensure everything is correct. When you decide to make an application, you can be confident in knowing exactly what a potential lender is going to see when it assesses your application.

So, what should I do?

The only way of making sure potential lenders see correct information when they perform a credit check is by checking your Credit Report yourself. It’ll show your Credit Accounts, Financial Associations, Court Records, Searches, and Electoral Roll information and even more in thorough detail. By checking it yourself, you can make sure you’re putting your best foot forward with any applications you make.

It’s also worth noting that every credit application you make will add a Credit Application Search to your Credit Report – this will reflect the details of your application.

While a single Credit Application Search won’t tank your chances at being accepted, if you have an abundance of them in a short period, potential lenders can read it as a sign of desperation for credit, which is also something they tend to avoid. The average number of Credit Application Searches is typically one per month.

To sum up with key points:

  • No one is guaranteed a successful credit application, regardless of how sky-high their Credit Score might be.
  • You have (potentially) unlimited Credit Scores and there isn’t a single true number. What matters is the data on your Credit Report, so checking this for yourself can reveal more than seeing only a Score.
  • Credit applications include crucial considerations outside of your Credit Score alone.
  • Your Credit Report is a goldmine of information.

How do I check my Credit Report?

You can save time and gain peace of mind by registering for a free trial with checkmyfile. Free for 30 days, it’s then just £14.99 per month, and cancellation is quick and easy online, by freephone or email.

Our Multi Agency Credit Report is the most detailed in the UK, allowing total access to your complete information from all three Credit Reference Agencies. Comparing all your Credit Report information on one easy-to-use platform means you can see clearly what a potential lender sees when you make an application.

Updated on 17 August 2021 by Sam Griffin

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