Fraud Scoring As Well As Credit Scoring Can Cause Rejection
When you apply for a product, it isn’t just a case of assessing whether you’re desirable, but also checking the application is legitimate. So, as well as the credit reference agencies, lenders also use completely separate anti-fraud agencies to try to weed out problems. For more information on ID fraud protection, see our Free ID Fraud Help guide, but here is how the two big agencies work:
National Hunter
This rarely mentioned system is much less factual, and so is prone to greater errors. However, it’s used by almost all major banks and building societies, receiving 96,000 applications a day, and has a real impact.
CIFAS: Lists confirmed past fraud
It is simply a record of known fraud, so if you’re on there, in general, you should know about it. It’s also the organisation to speak to if you think you’ve been a victim of ID fraud. Worryingly, any fraud committed at your address in the past could appear on your CIFAS file, even if it was nothing to do with you.
Does Paying Off A Loan Help Or Hurt Credit
Paying off a loan frequently hurts credit because it impacts your credit history and your credit mix. If the loan that you have paid off is your oldest credit line, then the average age of your credit will become newer and your score will drop. If the loan that you pay off is your only loan, then your credit mix suffers.
Why Your Free Credit Scores From Equifax And Transunion May Be Different
You may think that your VantageScore 3.0 credit scores from Equifax and TransUnion should be the same, but thats not always the case.
Remember, VantageScore 3.0 is ultimately just a scoring model. The three-digit number it produces depends largely on the information that lenders report to each credit bureau.
When credit scores that use the same model differ between credit reporting bureaus, its typically because they dont have the same information. Here are a few of the reasons you might see different credit scores.
- Your scores are from different dates. Different bureaus receive information from lenders at different times. If new information is accounted for in one credit score and not the other, the scores may differ.
- Your scores are calculated using different credit reports. Its up to lenders to decide which credit bureaus they report your information two. Some report to all three major credit bureaus, while others report to only one or two. If your Equifax credit report has information that your TransUnion report doesnt , your scores may differ.
- Your credit reports contain incorrect information. Its possible that one or several of your credit reports contain errors. Thats why we recommend regularly checking your credit reports for errors that may affect your scores anddisputing those errors, if need be.
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My Income Impacts My Credit Score
False. Your salary and income are considered measurements of your capacity to pay bills, not your potential credit risk.
“Income isn’t even on your credit reports so it can’t impact your score,” Ulzheimer says. “Wealth metrics aren’t considered by credit scoring models.”
While it’s good to know that the size of your paycheck has no influence on whether you have good or bad credit, you should know what does impact your score. Variables include your payment history, amounts owed , length of credit history, new credit and credit mix .
Strengthen Your Credit Score
- Improve your payment history by paying all your bills consistently and on time. Carefully consider any offers from creditors to “reduce” or “skip” payments before accepting
- Get current on delinquent accounts to reduce your outstanding debt and to avoid having delinquencies reported. Keep balances low on credit cards
- Build on your credit history. The longer you’ve had credit, particularly if it’s with the same credit issuers, the better for your credit score
- Think twice before applying for too much new credit. Don’t open accounts you don’t need, as inquiries made on your credit report could lower your score
- Diversify your credit. A large number of revolving credit accounts with open balances, for example, can result in a lower score than a combination of mortgage, installment and revolving credit balances
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What Goes Into A Credit Score
Each company has its own way to calculate your credit score. They look at:
- how many loans and credit cards you have
- how much money you owe
- how long you have had credit
- how much new credit you have
They look at the information in your credit report and give it a number. That is your credit score.
It is very important to know what is in your credit report. If your report is good, your score will be good. You can decide if it is worth paying money to see what number someone gives your credit history.
The report will tell you how to improve your credit history. Only you can improve your credit history. It will take time. But if any of the information in your report is wrong, you can ask to have it fixed.
You Can Freeze Your Credit For Free
There is no fee associated with freezing or thawing your credit. Until recently, credit freezes carried fees that varied by state, but they’re now free regardless of where you live in the U.S.
It’s also free regardless of whether you’ve been a victim of identity theft. In the past, victims of identity theft may have had their fees waived, but now credit freezes are available for free to everyone.
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How Do I Fix Mistakes In My Credit Report
- Write a letter. Tell the credit reporting company that you have questions about information in your report.
- Explain which information is wrong and why you think so.
- Say that you want the information corrected or removed from your report.
- Send a copy of your credit report with the wrong information circled.
- Send copies of other papers that help you explain your opinion.
- Send this information Certified Mail. Ask the post office for a return receipt. The receipt is proof that the credit reporting company got your letter.
The credit reporting company must look into your complaint and answer you in writing.
It’s As Much About ‘will You Make The Lender Money’ As It Is About Risk
Many people write to us incensed after rejection “I’ve a perfect credit score, I’ve never missed a payment, why on earth did they reject me?” This is based on a misunderstanding lenders are credit scoring to see if you match up to their wish list of what makes a profitable customer.
Of course, someone who is a bad risk is likely to be scored out as unprofitable by most companies. But the risk of not repaying isn’t the be-all and end-all.
Imagine a bank wants new mortgage customers. That’s a costly sell. Instead, it offers a current account paying a high rate of interest on a small amount kept in it. Yet when you apply, rather than scoring you as a bank account customer, it could actually be scoring to see if you’re likely to be a profitable mortgage borrower in future you might face rejection if you aren’t.
The secretive nature of credit scoring makes this difficult to ever truly know. Here are some other things to look out for:
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What Should You Look For In A Report
First, make sure all of your personal information is correct. Then zero in on your credit history, especially the subsection called adverse accounts. It can show potentially negative items like a past-due credit account or a debt that was sent to collections, which can hurt your credit.
You may find errors in this section that youll want to correct. Reach out first to the creditor and then to the credit bureaus. The Consumer Financial Protection Bureau, a federal agency, has a guide for disputing errors, including sample letters.
If an error looks fraudulentfor example, you see a mortgage for a house you dont ownact quickly. Contact the credit bureaus and ask them to put a fraud alert on your account. Youll also want to file a report with the police and the Federal Trade Commission.
How Can A Credit Report Help Over Time
Good credit can set you up for other financial successes. For example, you may be more likely to receive a loan or you may qualify for a lower interest rate, which can save you money in the long run. A clean credit reportand its positive effect on your credit scorecan make it easier to get rewards credit cards, which offer perks, such as travel deals or cash back. And you may qualify for higher credit limits on your cards.
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My Employer Can See My Credit Score
False. When it comes to applying for a new job, people often think prospective employers can see their credit score. While they can pull your credit report, the type of credit report that employers have access to does not include your actual credit score.
“It’s not the same type of credit report that your lenders can see,” Ulzheimer says.
What employers do see when they run a credit check is your debt and payment history so they can look for any signs of financial distress.
Use A Credit Build Card To Build A History & Restore Past Issues
You need to build a decent recent history to show that you can be responsible with credit and use it well. The catch-22 is that as you have a poor credit history, getting credit is difficult.
The solution is to grab a credit rebuild card. See the full guide for full help, how to protect yourself, and top picks.
This is a card with a hideous rate, say 35% APR, which accepts people with a poor credit history. Yet provided you repay the card IN FULL each month, preferably by direct debit, and never withdraw cash, you won’t be charged interest, so it’s no problem.
Then just spend say, £50 a month on the card, and provided you have no other issues after six months or so, things should start to improve. After a year, it should make quite a difference.
Obviously, if you already have a credit card you aren’t using, then you can do the same on that without the need to apply for a new one.
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Why Should I Get A Copy Of My Report
Getting your credit report can help protect your credit history from mistakes, errors, or signs of identity theft.
Check to be sure the information is accurate, complete, and up-to-date. Consider doing this at least once a year. Be sure to check before you apply for credit, a loan, insurance, or a job. If you find mistakes on your credit report, contact the credit bureaus and the business that supplied the information to get the mistakes removed from your report.
Check to help spot identity theft. Mistakes on your credit report might be a sign of identity theft. Once identity thieves steal your personal information information like, your name, date of birth, address, credit card or bank account, Social Security, or medical insurance account numbers they can drain your bank account, run up charges on your credit cards, get new credit cards in your name, open a phone, cable, or other utility account in your name, steal your tax refund, use your health insurance to get medical care, or pretend to be you if they are arrested.
Identity theft can damage your credit with unpaid bills and past due accounts. If you think someone might be misusing your personal information, go to IdentityTheft.gov to report it and get a personalized recovery plan.
Find Out More About How National Hunter Works
It works by looking for inconsistencies between your current application form and any past applications you’ve made, trying to spot factual errors. While it can’t block your application itself, it triggers a red warning flag to lenders, and this happens roughly 7% of the time. Lenders can then check the info, and ignore it or do further checks. They’re not allowed to reject you based on the National Hunter red flag alone.
Factors such as a number of applications in a few days can also trigger warnings, though generally that’s more acceptable with mortgages, where it’s more common, than with credit cards.
What to watch for
It’s crucial to be consistent, even over long periods, when you fill in application forms. If you have a number of job titles or phone numbers, try to use the same one on every application. Changes to guidance introduced in 2009 mean lenders are supposed to tell you if National Hunter has been a contributing reason for your rejection.
How to check your National Hunter file
To check the info it holds on you, you’ll need to make a subject access request, which is free thanks to the introduction of the General Data Protection Regulation in May 2018. This can also be a useful thing to do if you think you’re a victim of ID fraud.
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Explore Your Other Options
Freezing your credit usually isn’t necessary if you’ve never been a victim of identity theft of fraud. If you think your information has been compromised, a fraud alert may be sufficient. It will let lenders know to verify the applicant is really you before opening a new account, while still allowing you to access credit when you need it. The exception is instant creditâbecause lenders take extra steps to verify your identity when you have a fraud alert on file, you may find that you won’t be able to be approved for credit instantly in stores.
When you add a fraud alert to your Experian credit report, the other two credit bureaus will be notified . The initial fraud alert, which lasts up to one year unless you cancel it sooner, provides a free credit report you can review. If you feel you need an extended fraud alert, which lasts up to seven years unless you cancel it sooner, you’ll receive additional free credit reports. You can also provide a phone number instructing lenders to contact you if someone applies for credit in your name, and you’ll get an instant alert to potential fraud.
If you’ve been victimized by identity fraud even with a fraud alert in place, a credit freeze may be helpful.
Request Your Free Medical History Report
You have the right to get one free copy of your medical history report each year. You can request a copy for:
- Yourself
- Someone else, as a legal guardian
- Someone else, as an agent under power of attorney
Request a medical history report online from MIB or by phone at 1-866-692-6901.
Not everyone has a medical history report. Even if you currently have an insurance plan, you won’t have a report if:
- You haven’t applied for insurance within the last seven years
- Your insurance policy is through a group or employer policy
- The insurance company isnt a member of MIB
- You didnt give an insurer permission to submit your medical reports to MIB
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Ask A Friend Or Relative For A Helping Hand
Your length of credit history plays a role in your credit score. FICO bases 15 percent of your credit score on factors such as the age of your oldest account and your average age of all accounts. Older is better.
In many cases, you just have to sit back and wait for your credit scores to improve within this category. However, if you have a loved one with a well-managed credit card account, you may be able to ask for a helping hand.
If a friend or relative adds you to an existing credit card as an authorized user, it might help lengthen your credit history. Assuming the account is in good shape , becoming an authorized user may improve your score if and when the account shows up on your report.
It may be tempting, but be careful not to piggyback onto a strangers credit card. Although there are companies who will help you rent authorized user status on another persons credit card for a fee, this practice may be considered fraud if you apply for financing after the fact.
Repairing And Managing Credit
A low credit score can translate into higher loan and credit card interest rates. It can also inhibit your ability to secure insurance, school loans, rental housing, utilities and even elective medical procedures.
If you have credit problems, work to repair your credit on your own or use a credit-counseling agency. Ask several agencies about services, fees and repayment plans before signing a contract. Beware any that ask you to pay up front or promise a quick fix it may take years to repair credit legitimately.
If you find errors on your credit report, correct them as soon as possible. To dispute an error, contact the financial institution that reported it or go directly to the credit agency. Provide all necessary details in writing. They then have 30 days to investigate, submit any corrections needed to credit agencies, and provide a written response. Learn more about disputing information reported by TD Bank
To protect your credit in the future, create a budget and pay bills on time, every time. Consider fees, interest rates and monthly payments before obtaining new credit. The sooner you begin to re-establish good credit, the sooner you’ll improve your credit score.
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