Even if you have a perfect credit record, banks will turn you down for credit for this reason....
Up until a couple of years ago, I had no credit rating. I got through university without getting a credit card, my mobile had been in my mother's name (sadly I was still the one stumping up for the bill every month). I was essentially a non-entity, credit wise.
And that's part of the reason I was turned down for my first credit card. I had no credit history or record, so HSBC had no way of judging whether I was an appropriate person to lend to.
However, it has now emerged that it's not just people that have never had credit that are disappearing in the eyes of the credit rating firms — and therefore the lenders. It could be any of us.
Disappearing debtsAccording to reports, between 40 million and 50 million financial accounts — credit cards, mortgages, loans, current accounts — that are still being used are nowhere to be found on credit reports.
And the reason they are missing from credit reports is simply that they were taken out before the year 2000. This is significant because from 2000 onwards, legislation required lenders and providers to revamp their terms and conditions, to include customer approval for sharing their details with other organisations.
Those approvals were not generally included in customer contracts before the year 2000, and that's why the banks and building societies have been unable to share those details with the credit rating firms.
Say goodbye to getting any credit
This is hugely significant to anyone who took out a credit agreement prior to the turn of the century, for a number of reasons. Firstly, let's say you bought your home in 1999 on a 10-year fixed mortgage. By now you will be safely on the standard variable rate, which in many cases is nice and cheap thanks to record low
Bank of England base rate.
However, if you choose to remortgage to a new deal to ensure you take advantage of lower rates, you may come into serious difficulty as the new lender will likely struggle to find any record of your original mortgage on your credit report — and therefore will be unable to ascertain just how good you are at repaying such a sizeable debt.
It doesn't even have to be anything as significant as a mortgage — if you have been with the same current account provider for more than a decade and want to move elsewhere, you may struggle to do so because of this.
Credit cards may also be tantalisingly out of reach, despite you effectively meeting all of the provider's criteria.
How to fix your invisible credit records!The first thing you should do is check your credit report. You can actually get a free trial to see your credit report from the three main providers,
Experian,
Equifax and
Callcredit.
Get on there and see exactly what the banks see each time you apply for credit. If you see any obvious credit history that is missing, most likely because of when you took it out, then it's a good idea to give the lender a call.
They will need your explicit permission before they are able to share the information with the rating firms, so make sure they are completely clear that you want those details shared.
Just how quickly that information appears on your credit record will obviously vary depending on the provider involved.
Once the trial comes to an end, obviously you will then be charged a monthly subscription for the service, so once the necessary changes have been made you may want to cancel the subscription. However, I've been a member of
Credit Expert for a couple of years, as I like to keep on top of any changes that crop up from time to time on my record.
Look out for any mistakesOf course, it's not just missing credit history that you should be keeping an eye out for when you check your record — chances are there may be an error or two in there as well which will be undermining your chances of getting credit.
One factor that regularly causes borrowers to come a cropper is the electoral roll. One of the first things bank check when you apply for credit is your registered address on the electoral roll, so make sure that information is correct.
Other things to look out for are accounts or cards that have now been closed, as well as linking you to other people (former partners for example) which will have an impact on your rating.
Finally, if there is something in your credit report which you think doesn't accurately reflect your position — perhaps there is an explanation for a missed payment for example — then you have the option of adding a Notice of Correction, of up to 200 words, to state your case.
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