Study: Many Brits lack key knowledge of credit scores


A third of customers declined for credit cards last year do not know why they were rejected, one of the UK's largest credit checking agencies has warned. According to new research by Equifax, one in three applications for a credit card was dismissed in 2010 because of a bad credit check. But while this in itself is cause for concern, arguably more alarming is the fact that so many do not know why their applications are being rejected.


Consumers 'ignorant over credit card application process'
Equifax has highlighted what it calls a "continuing lack of understanding" among consumers about how credit card applications are processed and the impact that a negative credit score can have. The firm's research indicates that a large percentage of people do not know their own credit histories or how these can affect their chances of success. It also found that 50% of those who were refused credit in 2010 simply gave up applying, rather than trying to find what they could do to improve their chances in the future.

Experts: If you're rejected for a card, check the contents of your credit report
Equifax explained that these reports contain information about whether existing credit accounts are settled, active, defaulted or delinquent. Any County Court Judgments or decrees will also be listed here, as will searches by lenders that have taken place in the past year. It is for this reason that consumers should not keep applying for credit cards if they are continually being turned away. The greater the number of providers to have already passed you over, the more likely it is that others will follow suit, as they will be keen to avoid credit loans that their rivals have already deemed too risky.

"The credit card market is still relatively subdued as lenders remain cautious about who they extend new credit to," said Neil Munroe, external affairs director of Equifax. "So it's vital consumers understand what information is used by credit card companies to assess their creditworthiness, as well as how they can make sure their credit rating is at its best for them to get the most favourable APR."

The UK's three main credit reporting agencies are Equifax, Experian and Callcredit. Before applying for credit cards, loans, mortgages or mobile phone contracts, you can find out your credit score by contacting one of these agencies.

See related: Applying for a new credit card? Check your credit score first; How to get your credit report, score

Published: 21 April 2011