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Is it possible to not have a credit rating?
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I'm no expert but when we wanted a small finance deal a few years ago we were refused...because we didn't owe anyone anything had no credit card and had no history, never missed a mortgage payment since i had one at age 21 either.
Present credit card obtained for and only used for online purchases and cleared by DD immediately.
Financial chap told me they prefer people who might miss the odd payment/need to extend terms etc and incur lucrative penalty charges.
Maybe this is rubbish, but it made sense.
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Long answer warning, but I do this stuff for a living among other things so I should contribute:
>> Is it possible to not have a credit rating?
Not really, but a relative absence of information about you makes a decision for a lender harder and it's more the case than it used to be that a blank history will create difficulty.
When I got into the credit industry 30 years ago, a clear record usually meant a successful application; now, when the norm is much more for people to have credit cards and bank accounts, an absence of information is unusual and is more associated with instability (moving around) and bad outcomes.
Lenders use a credit reference agency to support their decisions. You can break the information into chunks.
1. Can they find you? The essential pre-condition. They pass your name, address and DoB to the CRA. If the CRA can't find any record of you, then you could say that's tantamount to not having a rating, and it's pretty certain you won't get what you're applying for. Keys to 'finding' you are the electoral roll, and/or other credit agreements past and present. If you aren't on the roll, and have no credit at all, you may have a problem especially if there is no-one else with your surname at your address.
2. Public information. Electoral roll information, court judgements, insolvency information like bankruptcy or IVAs.
3. Search history. Every time you make an application, your records are searched, and a 'footprint' left. Part of the information given to enquirers is the dates of previous searches. One now and again is normal. A lot in a short space of time will potentially trigger a lender's policy rule as it is unusual and can indicate attempted fraud or loading up with debt.
4. Shared credit information. Lenders report monthly on the accounts they have, the credit limit if there is one, the balance, and the payment record. So a lender would see that I have a mortgage, how much I owe, and arrears or otherwise month-by-month. For a credit card, they would see the credit limit, the balance (utilisation) and again the month-by-month payment record. Ditto for loans and mail order accounts. Most lenders share information with the big CRAs - if they don't share, they don't get it.
5. Synthesised stuff - information the CRA compiles. They can provide a generic score, built from your 'profile' ; they provide fraud alerts, ID services, address linking (information is connected to addresses - applicants tend to conceal addresses if they have bad history, the agency can sometimes infer this and show the information for undisclosed linked addresses)
The agency doesn't make the decision, they just provide the information. The lender uses it to make the decisions. To quote one large lender's mantra, they want to see that applicants are
- able (to pay)
- stable
- willing (to pay).
The best evidence of this is previous and existing commitments which are maintained up to date and don't display any sudden and large increase in activity and indebtedness, so a bit of history that is good will improve your generic score materially.
So, it can be a good idea if you have no other credit at all to 'manage' your record by having a having a credit card, using it regularly, and paying off every month.
www.experian.co.uk/downloads/consumer/creditRefAgencyExplained.pdf
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Fascinating information there, Manatee.
I have copied that for future reference.
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I am surprised your mortgage didn't show up. Both my contract phones are listed and that enabled me to have enough history to apply for a credit card.
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Can vouch for your point number 3.
Certainly we fell foul of this a few years ago when looking at taking out a personal loan. We thought we had an exemplary credit record, both in good steady jobs, regular adequate income, no defaults, all bills paid on time, thus considered ourselves the ideal clients. Big surprise when we were initially refused.
Turned out that SWMBO had used one or two of the early comparision websites to check for the best deals andthat flagged up as a lot of multiple enquiries which set off alarm bells saying that signalled that because we were making possible multiple applications we were heading for financial difficulty and would then become risks. Eventually got it sorted but have been wary of using comparison websites for financial things since, though how you are supposed to compare rates without incurring the banks suspictions I'm not sure.
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Are there any pitfalls to applying for a credit rating? I only want to know what mine is out of curiosity.
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>> Are there any pitfalls to applying for a credit rating?
There shouldn't be, it will cost you £5 or so from experian or similar - note the distinction between seeing you credit rating and credit record.
Anybody interested in the problem of not being able to get credit because they don't have a credit history might find last Saturdays 'Moneybox' from radio 4 helpful - should still be around to 'listne again'
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Credit rating - -
