Concerns flagged up over credit reports system

By UK CreditCards.com

Credit scoring rules challengedCredit scoring rules in the UK might be unfairly penalising some credit card customers, it has been claimed.

Writing in the Independent on Sunday, personal finance editor Julian Knight criticised the process through which the ratings of credit card and loan applicants are formulated.

Commonly, credit card firms use the credit reports of applicants to gauge how likely they would be to make their repayments on time. Those with a history of making late payments, or missing them entirely, are therefore more likely to be turned down for new credit.

Mr Knight also pointed out that those who had made multiple applications over a short period of time were signalling "financial distress" to the providers, with each application leaving a trace on their credit records.

However, these applications could merely have been made as a consequence of a customer shopping around for the best deal and might not signal any money worries at all.

"It [the system] hits those who are simply exercising their consumer choice," Mr Knight commented.

In a recent report, the Bank of England signalled that the credit card market remained tight over the second quarter of 2009, with banks less willing to lend to "risky" customers than they were prior to the onset of the credit crunch.

The Bank added that these conditions were likely to continue over the third quarter of the year.ADNFCR-2308-ID-19361547-ADNFCR

Published: 15 September 2009