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This mistake will cost you a fortune in January

Alison Hunt
by Lovemoney Staff Alison Hunt on 29 December 2012  |  Comments 14 comments

If you're planning to sort out your finances in January, make sure you do this first.

This mistake will cost you a fortune in January

January is looming and with it, all of our good intentions. You know the drill - after all that indulgence we all vow to start exercising more, stop smoking/drinking, and most importantly, to get our finances in order.

That means getting a budget drawn up, working out how to pay off any debts we've accrued and starting to save or invest for the future.

0% Credit cards

And one area many of us should address is our credit cards. While on the one hand they provide us with credit when we need it, with APRs of anything up to 30% they can be a shockingly expensive way to borrow.

Fortunately, 0% cards are around to help. By moving your balance to one of these cards you can effectively freeze your debt, and give yourself up to two years to repay it, during which time no interest will be charged.

Sounds great doesn't it?

Ever been turned down for credit?

Unfortunately, this is a great example of an application that for many of us will end in rejection - indeed you may well have already experienced this. Which of course is baffling if you work, are on the electoral roll and don't have any CCJs against you. Why on earth would you be turned down?

Top reasons for being refused credit

Here are the top reasons you might get your credit card application rejected:

1) You've already got a lot of debt

It goes without saying that if you have a large number of credit cards, loans and other financial borrowings with high balances lenders are unlikely to lend you more as you're clearly not dealing with what you have.

2) You've failed to pay a bill on time

Yep, ignoring those bills isn't a good idea - whether they're from a utility company, a credit card or any other service. Don't think your lender will simply overlook your oversight either. Many providers and lenders will automatically put a black mark on your credit report, which is visible to any potential lenders in the future.

Missing the odd credit card payment is therefore a very bad idea. If you are having problems approach them head on - tell the lender involved straight away so you can work out a payment plan.

3) You keep changing address

Lenders love stability so listing a different address every six months or so will not impress - indeed it's likely to negatively impact your credit record. Try and stay put for at least three years. Similarly try not to move bank (current) account too often - sticking with the same provider for years can show lenders stability.

4) Not on the electoral roll

In the same vein not being on the electoral roll will negatively affect your credit rating - so make sure you're listed.

5) Too little/too much credit

What a fickle friend credit is. While having too many cards and loans etc can work against you (lenders worry about why you need so much at your disposal), the opposite can do exactly the same thing. Bizarre? Yes, but then without any credit history at all you're pretty hard to check on.

6) Dormant cards

If you don't use a credit card (and you don't owe anything on it) it's usually best to cancel it. Lenders are always fearful of someone that could buy half a dozen pairs of Christian Louboutin heels (or more) on a whim.

7) Reapplying for credit

Finally if you're turned down for credit, do not simply apply elsewhere - this may only make things worse! Each time you apply for credit a "footprint" is left on your record which can be seen by future lenders. Apply too frequently and you'll leave a cluster of footprints, making yourself look desperate for credit. It's essential to find out why you were refused in the first place so ask the lender involved and get copies of your credit report.

How to guard against refusal

As you can see there are many things that can affect whether or not you get credit. But there are ways to guard against them.

Get frequent copies of your credit report

The most obvious way is to check your credit report yourself. This way you can ensure the details are correct (and amend any inaccuracies with the relevant agency).

You can get a free trial with Experian via Lovemoney.

Basic reports

You can get basic credit reports for just £2 from Equifax, Experian and CallCredit. Send off for these every six months or so and you'll keep on top of things at very little cost.

Online reports

Alternatively, each company also offers an online, dynamic service that can give up-to-date information on your credit record instantly. What's more they can even send you email or text alerts when your rating changes.

So there you have it - some of the reasons you may be turned down for credit and how to guard against them. But forewarned is forearmed - apply for your credit reports today and start 2013 as you mean to go on.

Get a free credit report via lovemoney.com

This is a classic article which has been recently updated.

More on credit:

The best cashback credit cards

The best reward credit cards

The best 0% balance transfer credit cards

The best 0% purchase credit cards

The best credit cards to use abroad

How to build an excellent credit history

The alternative to chip and pin cards

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Comments (14)

  • CuNNaXXa
    Love rating 410
    CuNNaXXa said

    Equifax, Experian and CallCredit. I wish I had thought of the idea to sell someone their own information.

    I think it is better to make a one off enquiry, rather than to subscribe to the monthly service. After all, who really wants to spend £96 a year to keep abreast of who is monitoring their credit report.

    Report on 27 December 2010  |  Love thisLove  2 loves
  • Wellsprungalice
    Love rating 20
    Wellsprungalice said

    If you get a Co-op credit card and sign up for their cardholders' benefits package, it'll cost £8.50 a month. BUT for that you get the Experien £6.99 credit record service, plus insurance for up to 4 mobile phones in your household, including iPhones (O2's standard iPhone insurance is £10 a month), plus family travel insurance for your holiday, and on top of that, you can pick a package of insurance cover for card loss/identity theft, handbag loss/theft or gadget loss/breakage.

    Having been the victim of identity fraud once, I had been paying £7 a month for Experien's credit record service, and was also forking out for two lots of iPhone insurance, so I've saved almost twenty quid a month. 

    Report on 27 December 2010  |  Love thisLove  0 loves
  • Delta224
    Love rating 2
    Delta224 said

    I made an attempt to make a one-off enquiry, just now, to Equifax, but the website seems to block doing this (even after giving my address and card details). When I phoned their helpline they interrogated me as to why I was applying for a one-off statutory report, and I said I wanted to see if my credit had improved in the last few months. They have done their very best to block this, and I have now paid £5.99 to get my score and to enter a 30-day trial for the monthly subscription which I did NOT want to do! I shall have a look at my report now, but will certaily cancel within 30 days!

    It seems that if you really want just a one-off statutory report you'd have to apply via snail mail and wait 7 working days or more.

    Report on 30 December 2011  |  Love thisLove  1 love
  • SuziQ
    Love rating 2
    SuziQ said

    I think I'm a credit worthy customer, always pay off credit cards, don't have loans except mortgage and have been with my bank for 25 years. However, I've got old credit cards (which I've cut up and haven't been used in years) but they still appear on my Experian report! I've cancelled these cards and they are still appearing on my Experian report. I noticed that I am not on the Electoral role according to Experian and we've lived here for 2.5 years (voting last year), so it is completely out of date and shouldn't be used by lenders unless they can guarantee that it is up-to date. Please do an article about this, to get these companies to tighten up their procedures in these austere times.

    Report on 30 December 2011  |  Love thisLove  2 loves
  • satprof
    Love rating 1
    satprof said

    SuziQ: Have you asked Experian to correct your record? (As I understand it, credit rating agencies are obliged to update incorrect records.)

    I ask, not out of idle curiosity, but to see if the UK system works as it's supposed to. In the not too distant future, I expect to be returning to the UK from France, where I've been living for the last 21 years, and have some doubts as to whether the practice actually lives up to the theory!

    Report on 30 December 2011  |  Love thisLove  1 love
  • oldhenry
    Love rating 343
    oldhenry said

    Those credit reference companies are just another flea on the backs of ordinary people. They make money out of nowhere. They care little whether the information is correct as their statement are full of caveats . What a waste of money, better never to borrow money and keep away from these sharks.

    Report on 30 December 2011  |  Love thisLove  0 loves
  • JCBdriver
    Love rating 2
    JCBdriver said

    I agree with "oldhenry". I have never been refused credit, in any form.

    Thus I don't care what data these guys have on me!

    I certainly wouldn't pay them for my own details - just another scam, especially if the data is incorrect.

    Report on 30 December 2011  |  Love thisLove  0 loves
  • smithdom
    Love rating 33
    smithdom said

    The credit reference agencies should be entirely funded by the banks that use them, and individuals should have free access to their credit information. The current arrangement discourages people from paying to access their own information and thereby indirectly encourages undetected fraud.

    Banks should be obliged to explain the reason when they decline credit. If it is based on credit information from a particular agency then they should be obliged to identify that agency and explain what to look for in a your credit report from that agency. Too often banks give the excuse of commercial confidentiality as a reason not to divulge why they have declined credit.

    Report on 30 December 2011  |  Love thisLove  3 loves
  • why_not1
    Love rating 1
    why_not1 said

    Perhaps the best thing would be simply to stop borrowing, that would really scare the banks.

    Report on 30 December 2011  |  Love thisLove  1 love
  • i'm away with fairy now
    Love rating 0
    i'm away with fairy now said

    i've applied for several loans in the last 15 years and never been refused and most importantly never missed a single payment. I never paid a penny to get a credit report which is in my opinion a complete rip- off. Pay back what you get is the only way to be considered.

    Report on 31 December 2011  |  Love thisLove  0 loves
  • the Uncanny Mister Nibbles
    Love rating 3
    the Uncanny Mister Nibbles said

    Yeah. Great that "don't miss payments, don't be late", routine. Until you get broadsided by a drunk driver and end up in a chair for life.

    I did.

    Think it will never happen to you?

    Yeah, so did I.

    I had the Porche, the taylor, the office, world travel, upward mobility, amazing flats in NYC & HK, holidays anywhere I wanted, gorgeous, talented husband- the Dream.

    I had perfect, spotless, amazing credit in several countries until then. And disability brings unemployment (unemployability more like), followed by the loss of independence, mobility, home, family, friends. It's all so easy for bankers and credit agencies to judge you based on a computer geek's abstract formula. Where did we stop being individuals?

    I owe no one but one mortgage company, I own 71% of my home, I'm completely solvent. Think anyone will ever give me a loan again?

    As if.

    Does it really matter what your credit score is today? Right this very minute? Do you think anyone considering lending you money next time you REALLY need it gives a damn what your 'score' is today? It won't get you enough to buy a cup of tea. At your mother's. When she's feeling generous.

    You MUST insure you owe as little as possible and that you've looked at all possibilities. No, not those STOOPID cancer policies or accident policies. They only pay for stuff you stand absolutely no chance of ever having happen to you (I know, I worked for those companies). They do not pay out. You're better off putting your money in your mattress.

    SAVE. THINK AHEAD. SAVE SOME MORE. AND, MOST IMPORTANTLY, PRAY TO WHOMEVER/WHATEVER THAT YOU NEVER NEED HELP.

    Report on 04 January 2012  |  Love thisLove  3 loves
  • onlinegenie
    Love rating 2
    onlinegenie said

    Stopping borrowing is to frighten the banks is an interesting idea, but impractical. I always pay off my credit cards in full, but would not be without them - paying by credit card gives me insurance on items costing over £100.

    Report on 04 January 2012  |  Love thisLove  0 loves
  • PoohBah
    Love rating 23
    PoohBah said

    Don't bother with the Experian free trial or paid service - you can get the same results by registering with noddle.co.uk, and as the service is free you don't have to remember to cancel, and can access your credit details as often as you like. The information on mine is spot-on.

    (I see this report is yet another of a series of rehashed ancient articles being pushed out this weekend - it's dated "1 day ago" but the comments up to two years old are a dead give-away; at the time of writing the most recent comment is almost a year old! Talk about money for old rope - can I have a nice cushy job being a lazy journalist with Lovemoney, please?)

    Report on 30 December 2012  |  Love thisLove  0 loves
  • jonnie2thumbs
    Love rating 107
    jonnie2thumbs said

    If everyone (governments, companies and individuals) stopped borrowing money Western civilization would end. It will anyway, once it costs more to extract oil than they can sell it for, but hey ho

    Report on 31 December 2012  |  Love thisLove  0 loves

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