When I used my credit cards to raise finance for rapid growth business deals I was able to raise over £70,000 on cards alone. I could raise a further £30,000 or so on overdrafts and ‘personal reserve’ accounts with agreed borrowing limits.

There are many opportunities to make a lot of money in a short time when you have the capital to invest. Naturally, because of the high interest rates payable for cash borrowing on credit cards, the only reason you should borrow large sums of money using this method is to invest in opportunities, which virtually guarantee a good profit in a short time.

Before, I made the mistake of investing in business opportunities, which I had not looked into enough depth, and so consequently lost money on, I used credit cards to borrow several thousands at a time to finance some very profitable deals.

Some of these included the cash purchase of luxury cars, often after I had already located a buyer with ready money to buy from me immediately after I had taken possession. The best of these deals was when I bought a Mercedes 190E for £8,750 from a private owner in London and sold it for £11,000 to an eager buyer in Edinburgh who had already told me that was the price he would pay for this particular car. The purchase price was raised solely through my Visa and Mastercards.

I actually borrowed £9,000 and took a luxury overnight stay at the Hampshire hotel in Leicester Square as a perk of the ‘job’. The best part, though, was driving the car from London to Edinburgh.

I knew that I was making a sound investment, because, even if the man who had agreed to buy the car from me had changed his mind, I had a car with a book price of around £12,000 for less than three quarters of that sum. The very worst I was likely to end up with was my money back!

Although I have made more money in property dealing than any other business venture, followed closely by selling information, I still buy and sell the occasional luxury car. Not because I need to, sometimes I only make a few hundred pounds. I do it, just occasionally; because I enjoy it… it certainly beats working for a living!

Please note, because of the high interest rates of credit cards it is often not a good idea to use the money borrowed on them to finance property deals. The trouble with property, although it is nearly always a good investment, is that it can take some time to turn it around.

Credit card borrowing should only be used when you are virtually certain that a property is going to be ready of sale in a very short time and that you are confident that it will sell quickly.

I bought a shop, over three years ago, which I still have not managed to sell. It has been on the market now for over two years and looks like it will be some time before I finally dispose of it. The initial sum of £25,000 for purchase and repairs was raised on credit cards. But, after paying out thousands in interest I finally paid off the credit cards with a long-term bank loan. I was able to use the property itself as collateral, so getting the loan was not a problem. I mention it here simply to warn of the dangers.

When I first decided to buy the shop I was confident that I could have it ready for sale within three or four months. This I did. I then used it as a storage space for a further 9 months and then put it on the market. I know it will sell eventually, and I expect to get the asking price of £57,000, but my initial hope of a fast profit soon disappeared. So, although there is great potential in using your credit cards as a means of raising cash quickly to finance lucrative deals in property or any other business transaction, please be warned: Tread carefully.

Some people don’t have the credit rating they want or feel they deserve, and others who may have abused credit in the past now want to restore their credit rating to enable them to obtain loans from any source for whatever reason.

Yet another group of people have never had credit, consequently they have not achieved a satisfactory credit rating. Whatever their credit background, the fact remains that people today need credit, sometimes a lot of credit for a wide variety of reasons. It’s that kind of society. People owe it to themselves, and their families, to enjoy life to the full, something that’s highly unlikely without sufficient money. But unless one is born into a wealthy family or has a well-paying job or superbly successful business, living the good life without credit is virtually impossible.

Old-fashioned values teach you to live within your means, not to exceed your station in life. Thankfully, most people know there’s nothing to be ashamed of in asking for – and receiving – credit. Especially where you intend to repay your debts, in full, and on time. Taking our credit is merely a way of living on anticipated future earnings. The alternative is to save for the things you want: holidays, cars, a house, a good education for your children. But this isn’t always a realistic alternative: you need somewhere to live today, you need a car to get your children to school, and they – your children – need a quality education now. Tomorrow, in many cases, is simply too late.

You will of course have to pay for the things you obtain on earnings you hope to achieve tomorrow. For most people, however, the interest incurred is offset by being able to enjoy the things they obtain in anticipation of tomorrow’s earnings. And, in many cases, rising salaries and increased profits usually take care of future years’ credit repayments. But, as already pointed out, not everyone can get their hands on credit. Sometimes it’s through no fault of their own, sometimes it is entirely due to their own shortcomings that credit is refused time and time again. Whatever the reason, this manual could well make credit difficulties a thing of the past.

We intend to lead you down the credit card trail, telling you what credit is available, how to get it, how to apply for as much credit s you like, how to make your credit rating look far better than it is, what firms look for in your application, which firms to approach, and how to handle any problems you might encounter.

Credit cards, sometimes referred to as ‘plastic’, can be used to purchase a massive variety of goods and services, up to a specified maximum. In return, you agree to pay the amount indicated on statements submitted by the issuing company, usually on a monthly basis. This usually means paying off a certain minimum amount, indicated on your statement.

Credit cards are, in fact, the only kind of credit you are ever likely to need, certainly for everyday purchases, including cars, exotic holidays, even property. Nevertheless, because common rules and principles apply throughout the credit industry, the majority of information contained in this manual can be of use no matter what type of credit you apply for: credit cards, charge cards, loans from finance companies, bank credit, overdrafts, and so on. Just apply a little common sense and a few of the techniques contained in this manual. Basically, the method outlined for obtaining a credit card is:

  • Make sure you have a clean credit report. If you haven’t got a credit history, establish one. If you have a bad credit history, take steps now to clean it up.
  • Attempt to remove negative items and work hard at establishing positive entries on your report.
  • Establish a line of credit; if you are rejected find out why. Then, depending on why you were rejected, either appeal, sort out whatever problems and ambiguities exist, or start the cleaning up process again.
  • Begin increasing your credit limits. Do this legally and repay your debts properly and on time.

Credit Card Types

A whole host of credit cards are available, including everyday plastic from banks and similar financial institutions, charge cards, debit cards and Gold cards. New varieties are introduced virtually every day and you should keep up-to-date with what is available, from whatever source.

Here, we consider what is currently available, revealing the pros and cons of each, the best way to apply for them and how to improve your chances of getting what you want.

1. Credit Cards (Sometimes ‘Credit/Charge’ cards)

All major high street banks and most building societies offer these to their own customers as well as people who bank elsewhere. The major players are Access, Mastercard, Eurocard and Visa. People who have never been issued with a credit card before will usually have a maximum spending limit per month, and all cards carry an overall credit limit. These vary from one lender to the other and from one borrower to the next. When statements arrive each month, borrowers have the opportunity to repay the total balance outstanding or to spread payments over several months. The minimum the borrower can repay is indicated on the statement. Consequently, in ‘good months’, the borrower can pay a little extra to reduce the balance. In less affluent times he can limit his repayment to the minimum acceptable.

Paying less that the full balance outstanding at any point in time means interest is added to future statements. Despite the fact that you do not have to be a customer to apply for a card with any particular bank or building society, this would, in fact, be a distinct advantage, especially in borderline cases. The bank will look far more favourably on its own customers who have defaulted or experience credit difficulties in the past, than those who bank elsewhere or who don’t have bank accounts at all Advice.Always look for the best deal in terms of fees (if any) charged for opening an account, interest charged on outstanding balances, and annual fees charged by the issuing company.

Cards to avoid for a variety of reasons, usually because they are hard to get or charge high rates of interest, include: Midland Access, (Mastercard), Barclaycard Visa, NatWest Access and Visa, Bank of Scotland Visa, Lloyds Access, TSB Trustcard (Visa), and Yorkshire Bank Visa. Best cards to go for, usually because they are often easier to obtain, offer valuable free services, and high initial credit limits coupled with low interest, include: Leeds Permanent Building Society Visa, Halifax Building Society Visa, Chase Manhattan Visa, Robert Fleming/Save and Prosper ‘Classic’ card (Visa) and Standard Chartered Bank Visa. Note that some of these banks will expect you to bank with them before considering your application. Those that don’t require you to bank with them will usually write to your bank manager for a credit reference. Let your manager know what you are doing before the letter lands on his desk and remember tokeep your bank account ‘clean’ at all times.

Some credit cards double as cheque guarantee cards for those who maintain a current account with the issuing bank.

It is recommended that you apply for a duplicate card, since ATM’s can withhold your card at any time if you exceed your limit or you fall behind with your repayments. Losing your card, for whatever reason, usually means you will be unable to guarantee cheques.

2. Charge Cards

Here, the major lenders are American Express, also known as ‘AMEX’, and Diners Club International. Charge cards are mainly used by executives and business people, whose work takes them far afield and generally means incurring heavy travelling and entertainment expenses. Private individuals can, however, apply for – and be granted – a charge card. Holders are generally expected to clear their accounts at the end of each month. Both of these major firms offer ‘Gold’ and even ‘Platinum’ alternatives. These cards, whatever their colour (green, gold or platinum) are usually restricted to customers at higher income levels, who are also secure in terms of their employment or business status, and who additionally have a blemish-free credit record. An annual fee is levied on cardholders, irrespective of whether they use the facilities offered, or not. Other types of charge cards are available for use on a very much more restricted basis, namely by customers of particular stores, or passengers on specific airlines. These operate in much the same way as everyday credit cards, for example Access and Visa. Store cards, and similar types, are usually fairly easy to obtain and annual user fees are rare. They do however restrict one’s shopping to certain outlets and interest charges are frequently a great deal higher than for normal credit cards.

Advice. American Express and Diners Club International offer a range of very attractive benefits, usually available only to high-income earning individuals. Both, allegedly, offer unlimited credit, as long as you fulfill your part of the bargain, namely you repay the appropriate amount, when it’s asked for!

Quality charge cards frequently offer free travel insurance, confirmed reservations at hotels, monthly travel and entertainment magazines, and various other benefits. Many don’t offer cash withdrawals in Britain. Some allow you to make cash withdrawals abroad.

3. Debit Cards

These are frequently confused with traditional credit cards, and many carry the familiar Visa sign. Examples include: TSB Bankcard, Lloyds Bank Payment Card and Barclays Connect. Newer versions frequently have the ‘Delta’ sign in place of the earlier ‘Classic’ symbol. Delta, incidentally, is an electronic debit system found on Switch cards issued by the NatWest, Midland and the Royal Bank of Scotland.

These cards automatically debit money direct from your bank account, in much the same way as a cheque does, but faster. They can also be used for ATM’s (outside service tills) and double as cheque guarantee cards.

Debit cards are normally issued free of charge. One main disadvantage is that retailers and ATM’s can retain your card where fraud is suspected or your credit level has been exceeded. The answer is to apply for a duplicate card, which should be stored in a safe place.

Advice. It’s possible to force an overdraft on your current account with one of these cards. Other than that, the only real advantage is convenience. If you do decide to go overdrawn, bear in mind that you should not do this without prior permission from the bank, and you might incur high penalties for doing so. Another major problem might be where you unofficially extend your overdraft in a shop, which uses electronic payment and authorisation terminals – your card will usually be retained. You won’t be able to extend your overdraft using ATM’s. Smaller shops on some major supermarket chains don not use electronic funds transfer terminals. These are the ones to go for.

4. Gold Cards

These are available from NatWest, Midland, Lloyds, Barclays and American Express. American Express Gold cards are also available to customers of Lloyds, Grindlays Tyndalls, Bank of Ireland and Royal Bank of Scotland. Applicants prove a minimum annual earnings level from employment of business. This annual earnings level varies from one source to another, the highest of which is probably Coutts and Co., part of the NatWest group.

With the exception of American Express, most Gold cards are either gold Mastercards or Visa Premier cards and can be used in almost exactly the same ways as their standard counterparts.

Among the many advantages Gold cards have to offer is a sizeable overdraft facility, which is unsecured, and yours to use as you wish. The amount of this overdraft varies between issuing companies.

Holders of Gold cards are frequently referred to by banks as ‘preferred’ customers. Visa Premier cards double as cheque guarantee cards. A separate cheque guarantee card is normally issued with other Gold cards. Holders can usually draw higher rates from ATM’s than are available to non-holders.

Your Credit Record

All lenders, credit card companies included, need to know that what they lend will be repaid, with interest. To satisfy themselves on this point, all traditional lenders turn to a group of agencies to provide the information they need.

Four major credit reference agencies in the United Kingdom hold credit information on everyone over 16 years of age. There are other bureaus, which operate on a local basis, but they are few and far between and tend only to be used by small moneylenders. Contrary to popular opinion, there is no central credit file shared by all agencies. Each agency has its own set of information files, which do not necessarily match with those held by their counterparts. Usually however, this will be the case, since agencies swap information on a regular basis. Agencies offer a similar service to their major clients, usually banks, building societies finance houses.

Agencies provide information relating to specific applicants, in return for a set fee per search ranging from a few pounds for enquiries about private individuals and over £100 for limited companies. Information is usually held for up to 3 years, with CCJs being retained for 7 years, even if the debt is subsequently cleared. The reason why satisfied CCJs are included in explained in terms of lenders being interested in the whole credit history of prospective borrowers, including reasons why a person should have previously fallen into debt. All information, incidentally, good and bad is deleted after the appropriate period: 3 or 7 years.

Inquirers can obtain details of information held on them. This is usually provided on a computer printout, and it should include ALL the information held about you. Typical details include your name and address, other residents at that address, how long you have resided there, possibly your date of birth, a listing of all known credit transactions, lender details relevant dates, repayment details, current status of the account and other information relating to previous borrowing.

The amount of information passed on to specific lenders varies, usually depending on the level of service they pay for. Unfortunately, you don’t know which lenders subscribe to the more comprehensive information service any more than you know those who don’t. If in doubt, assume your prospective lender has access to all of the information held on your file.

The computer printout you receive will most likely include coded information. It will appear confusing. To help you understand what is said about you, we have included a list of common codes with meanings towards the end of this manual. Each time a prospective lender asks for information about you, this is recorded on your file. Consequently, all future lenders have a good idea of what credit you have requested and what you have actually received. A large number of enquiries, especially unsatisfied enquiries, has a high negative impact on most credit scoring systems. Note that, even if you subsequently withdraw your request for a loan, the new prospective lender will almost invariably conclude that you were refused! Make sure you have access to all relevant facts and figures before you ask for a loan and save yourself the trouble -present and potential – of an inadvertent blemish on your credit record.

How to Obtain a Copy of your Report

There are two ways in which you can apply for a copy of your credit report. Under the Data Protection Act, 1984, you are entitled to view any information held about you on computer disk. You can request this information at any time.

Your second legal right to information is when you have been refused credit. Here, you can apply for a copy of your report within 40 days of the refusal. The report must be provided free of charge. Outside of this period, the credit bureau will usually charge you a statutory fee of between £1 and £10, usually the latter.

First you must discover which bureau, or bureaus hold information about you. Your bank or lender will be able to tell you which agency they regularly use. Alternatively, and this is the recommended method, contact all of the two main agencies listed below:

  • Experian, Customer Help Service, PO Box 8000, Nottingham NG1 5GX
  • Equifax PLC, Consumer Response Centre, Department 2E, PO Box 3001, Glasgow G81 2DT

Having no credit history can sometimes be as bad as having a poor credit history. If lenders don’t know you, or your ability (more so your willingness) to repay the loan, there’s every chance they won’t give you credit.

Fortunately, there are ways to establish a credit history – a good one. The secret is to start small, establish a minor line of credit, build a clean reputation for yourself, then go on to bigger and better things, increasing your credit rating several times over the course of future years.

One of the most effective starting points is to open a current account with a local high street bank. Build up a reputation as a good, honest, straight-talking customer. Wait six months before trying to obtain credit. During this time, make sure you keep well in with the manager and staff. Don’t bounce cheques, don’t go overdrawn, don’t have direct debits returned because of lack of funds. During this period, you will no doubt have established yourself as a reliable customer and most likely you will already have been issued with a cheque guarantee card. If not, apply for one as soon as this six-month ‘test’ period has ended. The cheque guarantee card now becomes your passport to further, bigger credit sources. No credit checks are likely to be made if you follow this method.

Your next step will most likely be stores. Most stores issue instant credit on presentation of a valid, current credit card.

If you prefer not to restrict yourself to shopping at one or two main stores, a traditional credit card such as Visa or Access might be more appropriate. Usually, a short, informal chat with your current bank manager will be enough. The bank manager or his next in line usually has the power to provisionally agree to your request, subject to his decision being ratified by head office. His decision is rarely overruled. Play fair with your bank manager and he will do his best to help you.

Your first card will usually have a low credit limit, maybe just a few hundred pounds. This is to establish how you use the card, how you repay your debts, before letting you loose on higher amounts of cash. Don’t worry. Play the game, use the card wisely, don’t exceed the limits and always repay the absolute minimum, on time. Pay more than the minimum if you can, just to let them see you’re not crying out for money. In time, your level will be increased, sometimes significantly in a short period of time. Frequently, your credit limit will be automatically increased by the issuing bank. Alternatively, you can apply to have your limit reviewed and increased where appropriate. Once you have a valid credit card, with a higher credit level, you will be amazed at how easily other types of credit can be obtained! Negative statements on your report make it very difficult to obtain credit. Any kind of credit!

Fortunately, there are ways to offset most problems. If the entries are incorrect or misleading, you can have them amended or removed. Forms for this purpose are available from all main credit agencies. If, on the other hand, the entries are genuine and there is no way of having them amended or deleted, the following techniques can be employed to gain credit:

  1. Suggest to the lender that you provide security for the loan. Be careful, however, because this usually means offering your home or other valuables as security. If you default, you could lose everything!
  2. Ask whether guarantor will help consideration of your application. This usually means enlisting someone with a good credit record to back you. It isn’t an easy option, and very few people, other than close friends and relatives, can be expected to support you here.
  3. If you are married, get your partner to establish his or her credit record separately. Sadly, unless instructed to the contrary, bureaus will usually hold together the credit records for all members of the household. If one member has a poor credit history, this reflects badly, and very unfavourably, on the others.

Ask the credit agency to have your information listed separately. Your partner might then set about establishing a blemish-free credit record in much the same way as those without a credit history to support them, namely they open a credit account, ask for cheque guarantee cards, apply for credit cards, and so on. Now your partner applies for credit in his or her own name.

Removing Negative Items from Your Record

Legally, you are entitled to view the contents of your credit report and to have erroneous information corrected or removed.

As pointed out earlier, even with a good credit history, too many loan applications and enquires on your record will go against you. You must therefore take steps to have those enquiries removed. To reiterate, any enquiries made without an account being opened will appear on your record. The lender will usually assume that your application was rejected. It will go against you.

If you find yourself being refused credit purely because of earlier unsatisfied enquiries, you can ask to have them removed. Enquiries normally stay on your record for up to 1 year.

A nominal charge will usually be made for deleting these entries. First, you’ll need to obtain a copy of your report. When it arrives, study is carefully, noting any errors, inaccurate or outdated information, or other items, which are untrue or misleading.

Next, write to the credit bureau concerned, pointing out all the errors, ambiguities and outdated entries. You can also have a statement of up to 100 words placed on your file to explain any negative entries to potential lenders.

If you have a fully paid CCJ recorded against you, make sure the entry shows that the debt has, in fact, been discharged. A satisfied judgement is bad; an unsatisfied on is much worse.

Allow up to 28 days for an amended copy of your report to reach you. If you haven’t received it in this time, contact the bureau again. When it arrives, check your record very carefully indeed. Make sure nothing new has been added and check that the appropriate amendments have been made. If there’s anything you are unsure about, contact the agency again. Be persistent. If you want credit in the future, time and trouble taken to rectify your report will prove a more than worthwhile exercise.

Credit Evaluation Techniques

The majority of lenders use some form of scoring system to evaluate loan applications. A number of common questions will be asked by all, usually including details about your home, salary, job number of dependants, and so on. Additionally, some companies apply their own exclusive criteria, requesting information not always required by their counterparts.

Consequently, if you are turned down for credit by one company, it doesn’t always follow that another company will reject your application, even where you provide exactly the same information.

Credit scoring systems work on roughly on the same principles, namely that a certain number of points are allocated to each answer you give. Some answers will score much more favourably than others. Certain answers will almost certainly exclude you from credit altogether.

Among those factors, which appear on virtually every application form, you will find the following:

Residence.

Where do you live? Note that some areas are more desirable than others, and it is not uncommon to find someone living in a particular area being accepted for credit, and another person with virtually identical personal circumstances being refused credit. In the Latter case, the only real difference in circumstance is a less than desirable residential area.

Whether You Own Your Own Home.

Homeowners will always find credit more easy to obtain than those who live in rented accommodation. The following is the preferred order of preference for lenders:

  1. Home Owner
  2. Tenant in unfurnished accommodation
  3. Tenant in furnished accommodation
  4. Applicant living with parents
  5. Resident in mobile accommodation, including caravans (static &  mobile)

How Long You Have Lived at Your Current Address.

Lenders prefer you to have lived at your current address for at least three years. This creates an impression of stability.

Length of Employment.

As for the last factor, the longer you have been in your present job, the better.

Occupation.

The type of work you do is reflected considerably in the number of points awarded to your application. Professional people normally score much higher points than unskilled applicants. In order of preference for lenders we find the following:

  1. Professionals: Teachers, solicitors, accountants, dentists, doctors, veterinary surgeons.
  2. Skilled Workers: Business executives, policemen, farmers, civil servants, secretaries, salespeople, joiners, plumbers, motor mechanics.
  3. Semi-skilled Workers: Assembly operators, telephonists, members of the armed forces, drivers.
  4. Unskilled Workers: Labourers, packers, cleaners, bar staff, farm labourers, housewives.

Age.

This category is divided into several groups. Generally speaking the younger you are, the less points you receive. The highest points are usually scored by applicants in the 25+ group. Points increase with age, until the late 50’s. Namely as retirement draws closer and your ability to repay long-term loans decreases.

Income.

Usually, the higher your income, the more points you will be awarded. But not always, and some evaluation systems are programmed to reject applications showing unusually


high earnings. The general assumption being is that someone earning £100,000 of so a year is not the kind of person you expect to be applying for his first credit card.

Dependants.

Lenders need to know how any people you must provide for, and what drain this is likely to have on your current finances.

Bank Accounts.

Applicants with current bank accounts are assumed to be stable and reliable, even if they’ve just £1 or so in credit.

Credit References.

Any mention of bankruptcy, defaults or CCJ’s will usually spell instant rejection. Quite naturally, if you’ve proved a bad credit risk in the past, there’s little reason why the current potential lender should expect you to be any different.

Filling in the Application Form

How you answer the questions is very important. It can make all the difference between acceptance and rejection. Pay very, very careful consideration to completing your application form.

Some perfectly responsible people are refused credit simply because they don’t fit the profile of the ‘ideal’ borrower. The way around the problem is to mould your answers to suit the form, even if this means adding a separate sheet to include information that hasn’t been requested, but which you think will help your case and avoid potential ambiguities. Among the things to consider here are the following:

Reason for the loan.

Certain reasons will score points for you; others will earn you instant rejection. ‘Good’ reasons include: To purchase your own home, a new car, consumer goods. To carry out home improvements or pay for private schooling, weddings. ‘Bad’ reasons generally include: Consolidation of existing debts, new business start-up, money to finance politics, loans concerned with unstable mental health.

Advice. If your reason for wanting the loan fall’s into the ‘good’ category, emphasise this point Otherwise, either consider looking elsewhere for the money you need, or look for some way to improve the appearance of your application. Here, if you need money to finance a new business of the type you’ve already operated as a partner for several years, you might add a note to explain this fact, pointing out your vast experience, including profit figures and trade references, where appropriate. Applicants have been known to resort to lies in this section, more than any other. This is not a good idea. If your lies are discovered at the application stage, you will almost certainly be rejected. If discovered later, you might find yourself facing a request for the immediate repayment of the entire loan sum.

Owning Your Own Home.

Whether you own your own home, live with your parents, rent some dilapidated caravan on some piece of wasteland, will greatly influence your chances of obtaining a credit card. Owning your own home will always attract the highest score. It usually means you are a responsible, forward-thinking individual, someone who isn’t likely to do a ‘moonlight flit’ to avoid paying their debts! Note that little distinction is usually made between applicants who own their own homes outright and those who have high mortgages.

Advice. Be careful how you answer questions here. To illustrate how easy it might be to ruin your chances, consider the case of a young couple that might decide to live with one set of parents while their own home is being decorated. Providing the answer ‘Living with Parents’ (true, but ambiguous) might earn them instant rejection. Conversely, by providing the response ‘Home Owners’ (true) while saying nothing about current living arrangements (largely irrelevant), their credit rating will be significantly improved.

Length of Residence.

The longer you have been at your present address, the more lenders will view you as a responsible person. This is so whether you own or rent your home. If you have lived at your present address less than three years, points will normally be deducted from you. Conversely, if you’ve lived there longer than three years, points will be added.

Advice. If there’s a valid reason for constantly changing homes, point this out. Reasons here might include promotion, examination success and the chance of new opportunities, starting a business in a special enterprise zone, relocation with your company, and so on. If you are new to your current address but you were in your previous home for several years, this should also be emphasised on your application.

Your Job.

Changing jobs regularly is bad, and will usually score against you. Ways to offset this include pointing out valid reasons for frequent job changes, including: promotions, examination success, transfer within the same company or group of companies, freelance employment, or that constant moving around is an essential feature of your lifestyle. In the latter case, locum doctors, stand-in teachers, artists and performers, writers, photographers and so on, are found to change jobs regularly, sometimes several times each year. If you fall into this category, either include this information in the appropriate section or add it on a sheet to accompany your form.

Income / Ability to Pay.

All lenders are really concerned with is your ability to repay the debt. Here you list your salary or wage, and income from all other sources.

Advice. Include all sources of income, however small. It all mounts up. This means including salary or wage, bonuses, earnings from moonlighting, part-time work, overtime, maintenance and child support payments, and so on. Include a separate sheet with your form is necessary.

Dependents.

This question is usually asked in order to determine what commitments you already have in terms of those you are responsible for housing, clothing and feeding. A figure of 1 to 3 dependents will usually yield the best score. Anything over 3 might indicate that your budget is already under some strain. Ironically, applicants without dependents do not score highly, assumption being that they have less responsibility and can easily uproot their homes should their burden of debts prove too great.

Advice. Don’t include anyone for whom you are not financially responsible. An elderly parent living with you, for example, while you might be responsible for their well-being, is not necessarily financially dependent on you. Similarly, sons and daughters at college or university, while you are still responsible for them, can sometimes be viewed as self-supporting.

Bank Accounts.

Having a bank account with a credit balance will usually add to your credit rating even if it contains just a few pounds. Bounced cheques, debits returned for lack of funds.

Advice. unauthorised overdrafts and so on, will count against you. Open a bank account if you haven’t already done so. Don’t go overdrawn, don’t bounce cheques, and make sure there’s always a credit balance. You can frequently increase your score by opening the account at the bank you approach for credit facilities.

Credit References.

This section is normally scored by hand. Negative factors score low. Positive factors score points of varying degree. Any mention of CCJ’s or bankruptcy will usually lead to rejection. Negative points are listed against enquiries, even if accounts are not subsequently opened.

Advice. ‘Clean up’ your credit record as much as possible. This means having ambiguous, erroneous and inaccurate entries amended or deleted.

Credit Cards.

Holding major credit cards will always score points, the assumption being that you have already been tested by some lending institution, and presumably have lived up to the trust placed in you. Most systems do not place the same reliability on common charge cards, for example those issued by stores and supermarkets. Other; very important things to remember when applying for credit include:

Telephone.

Having a telephone is, apparently, an indication of stability. If you haven’t already got one, do all you can to have a line installed.

Bypassing the System.

Normal scoring works best with short answers! If you want to bypass normal scoring methods, especially where you think you’ll be rejected or there’s something you want to add to certain responses provide a long answer to problem questions. This usually means your application will be passed to a superior officer for a final, more personal decision. In bypassing the system, doubtful applicants can frequently make a negative answer appear more positive.

Finance Company Loans.

Do not mention these if possible. Even if you proved an exemplary customer and the finance company is chasing you to take out more loans, you will still score negative points on your application for a loan from other sources.

Improving Your Credit Rating

Details provided in this section, and all other parts of this manual are for your guidance only. The author and publisher is not recommending that you apply for credit you cannot repay. This is illegal and foolhardy. If you need credit, if you want it, and if you are prepared and able to fulfill you commitments, this section is for you. All actions relating to credit must be considered very carefully indeed.

Having said that, this section applies to anyone who has difficulty – actual or potential – in obtaining credit. It therefore includes advice to people who have no credit history to speak of, those whose history is poor, and those who simply want to improve their current credit rating.

The first step towards improving your credit rating is to obtain a major credit card, usually from one of the main High Street banks. Your credit card is your passport to further credit, given that a check has already been carried out into your credit-worthiness and usually you will already have a reasonably good rating.

To obtain a major credit card, you will usually have to use an address, which is free from County Court Judgements (CCJ’s). If those judgements are against you, you can’t avoid giving the game away, and your application is unlikely to be approved. If the CCJ’s aren’t yours, ask for your credit history to be maintained separately before submitting your application. Alternatively, consider moving out and setting up another address, or move in with someone else.
To get a card without credit checks you will need a bank account at a major retail bank. Choose the largest branch you can find such as a major bank in London or one of the larger cities. Ask to open a current account and take some form of ID with you: a driving licence or your birth certificate, for instance.

Usually you will have to provide the names and addresses of at least two referees who will vouch for your honesty and reliability. Be careful whom you choose. You will almost certainly be asked for details of your current bank. If you haven’t already go a bank account, tell them you’ve always dealt with cash in the past, and instead offer as referees two people you know who have bank accounts themselves. Ask for a chequebook and ATM card.

You’ll have to put some money into the account, preferably several hundred pounds, better still a thousand pounds. Have your wages or salary paid direct to this account. Treat this account like gold, which in fact it is. Don’t go overdrawn, don’t bounce cheques, don’t do anything if you can help it, other than withdraw normal living expenses. After six months, apply for a cheque guarantee card or a debit card. If you’ve behaved yourself, this will almost certainly be granted. Continue to use the account, and even though you might be allowed to go overdrawn, resist the urge at all costs. Now ask your bank manager for a Visa card. Next, you can increase your credit rating by establishing an independent line of credit, with a mail order company for instance. Here, all you need do is send off for a catalogue form one of the main companies whose advertisements appear regularly in weekly women’s magazines and most Sunday colour supplements. Order something to the value of approximately £200. Repay the debt weekly, on time, and never miss a payment. Pay more than the minimum requested if you can, even if just a few pounds of so extra each week.

After six months apply for an American Express card. Look for the appropriate local office in ‘Yellow Pages’. Ask your bank manager to provide you with a reference. Getting the card is not an automatic entitlement, however good your current credit rating. Frequently, you’ll be asked to wait another six months before submitting your application again. Do this, making sure your bank manager is informed and ready to provide a reference for you. You will almost certainly get your card this time. Six months or a year later, you can apply for a Gold card. Ask you bank manager for an appointment to discuss the matter; and have details available to prove you have sufficient income or business profits to support your application.

If your application is accepted, you now have access to a very high credit level, usually a minimum £10,000. Use this amount and make regular repayments. Try to pay more than the minimum requested. After another six months, ask for your overdraft to be increase. This will usually be approved. If you make a similar request every six months or so, eventually your credit level will increase to something like £50,000. All without credit checks!

What to do if Your Application is Rejected

The most obvious first step is to find out why you were rejected. You have a legal right to be told the reason, unless you have waived this entitlement. Unfortunately, many lenders include a small footnote to their application forms, which states that in the event of the application being declined, no further correspondence will be entered into, and no reason will be given. If you sign the form including this statement, you effectively waive your right to further information. Where this happens, make another appeal for written information. If all fails, ask for an appointment to discuss the matter personally with the lender or his representative. Remember, lenders are in business to make money. This means providing money for others. Forward thinking lenders will do all in their power to make you ‘fit’ the application form, but only where they expect to get their money back, with interest. Suffice to say, most rejections fall into the following categories:

  1. Poor or non-existent credit references
  2. Poor or non-existent bank references
  3. Inability to verify employment details
  4. Insufficient income
  5. Inadequate security
  6. Arrears on existing accounts
  7. Declared bankrupt
  8. Excessive current obligations
  9. Length of employment inadequate
  10. Length of residence at current address inadequate

Even if you never discover why one particular application was refused, you can still use the above list to tailor future applications. This doesn’t mean telling lies, but it does mean wording your responses to more closely resemble the ‘ideal’ application. Lying, incidentally, will always lead to rejection. If your lie isn’t discovered until after the loan is agreed, the agreement will almost certainly be cancelled and the full balance of the loan will be requested forthwith.

Sadly, some applications are still rejected on illegal grounds, namely on the basis of sex, race, colour, national origin, or religion. Fortunately, the law is on your side. If you suspect you have been discriminated upon for any unlawful reason, contact your solicitor immediately. If you don’t have a solicitor, ask the Citizens Advice Bureau to assist you. So, what does the law protect you against? The many things to consider here include:

No one should be turned down for a loan purely on the grounds of sex, marital status, race, colour, national origin, religion or disability.

A creditor cannot attempt to dissuade you from applying for a loan on any of these grounds.

Potential creditors must not ask questions about your spouse, unless that person is relevant to the application, for example, where you might be relying on your spouse to provide money to repay the loan. This might, for instance, be so where the applicant is employed by his or her partner.

Resubmitting Your Application

Now comes the time to tailor your application to more closely fit the type of person lenders want to do business with. Rule Number One: Never consider resubmitting your application with the same information. Credit scoring systems are impersonal. Computers don’t take pity on hard luck cases!

The first step in resubmitting your application is to discover the reason for the earlier refusal. If you know what it is and it can be corrected, do this now. If, however, the reason is legitimate – even if it seems unfair – and you still believe in your own credit worthiness, ask to speak to the manager of the lending company, or his main representative. Bear in mind that the manager will almost certainly not agree to reverse the earlier decision, however well you plead your case, and no matter how inefficient his or her own contribution. More likely he or she will ask you to resubmit your application. This is what you should do. You now have the benefit of hindsight and can mould your application accordingly.

Alternatively, apply to other lenders, since all apply their own set of criteria for scoring or evaluating applications. Ironically, the very same information that lost you the earlier loan, might well fall well within the requirements of another lender.

What Happens if You Are in Default?

If you fail to make regular payments, you will receive a series of communications from the lender, ranging from telephone calls to letters, and eventually personal communications. If you do not come to a satisfactory agreement relating to repaying your debt, the matter will usually be passed to a debt collection agency. If you are weak or your conscience pricks, this is where the going starts to get tough. Sometimes very tough indeed!

Some debt collection officers will make life difficult for you, although harassment is illegal. If you consider you have been harassed, consult your solicitor. And, despite what they say to the contrary, it is very, very rare for any threatened prison sentence to materialise. If you genuinely can’t pay, your only course of action is to state your case to the debt collection agency, keeping your cool as far as possible, then wait for the next step to take place.

This next step is usually where the debt collection agency turns the matter over to a solicitor. If he has no luck getting you to pay up, the next thing you’ll discover is a County Court Summons or a High Court Writ appearing on your doorstep. Many debtors have tried ignoring these missives in order to gain a little breathing space. But the courts are persistent and eventually an enquiry agent will be employed to find out if you still live at the address they have for you. Be warned: enquiry agents rely on photographs or video recordings to back their findings. If it can be proved you still live at the same address, writs will be posted back to you and deemed to have been legally served. Most banks will pursue you to the bitter end, unlike most credit card companies with the exception of such as American Express.

You are now faced with going to court or making an offer to the judge or registrar. The latter usually means offering small monthly payments to offset the debt. If you do nothing, the creditor will gain judgement against you, and repayments can be authorised from your salary. Alternatively, bailiffs can be employed to seize certain of your possessions to repay all or part of the debt. If you don’t have a job, don’t own your own home, and have no valuables to speak of, the only course of action left open to your creditors is to have you declared bankrupt. This is a humiliating process, one that at best will keep your creditors from you. But, you will never be allowed credit again.

At the first signs of trouble, a number of organisations are there to help you, most importantly the Citizens Advice Bureau, whose officers can suggest ways to alleviate your problems and help you make plans towards eliminating them. Look in ‘Yellow Page’s for your local office and telephone to make an appointment to discuss the situation. The Citizens Advice Bureau can usually contact creditors on your behalf.

Hints and Tips to Keep You in the Good Books

Bear in mind that:

Some lenders, primarily banks, will count it against you if you have had previous credit with a finance company. Even if your behaviour was exemplary! A minimum salary – usually much higher than the average salary – is usually an essential prerequisite for a Gold or other prestigious charge card. Find out what this amounts to before you waste time completing an application in respect of something you don’t qualify for.

Always pay a few pounds extra to the amount requested on your bill. This will cause most computer systems to automatically upgrade your credit rating and credit limit.

Don’t list stocks, shares, bonds, or other valuables on your application form. It won’t make one iota of difference to your application, but if you default, these goods may be seized from you.

Count all sources of income in your application: this includes child support, maintenance payments, bank and building society interest and so on. Bear in mind that if you default on your credit card payments, the bank can seize money held in other accounts. It might be wise to consider holding separate accounts at other banks. This doesn’t mean different branches of the same bank, but different banking companies altogether. Most applications request monthly income figures. Most weekly earners calculate this by multiplying their weekly wage by 4. A far higher, and more accurate, monthly earnings level is achieved by multiplying your weekly income by 52 (weeks in the year) and dividing by 12.

Main Banks

Head Offices (For local branches consult ‘Yellow Pages’):

Abbey National, Mercury House, St Peters Road, Bournemouth, BR1 2NT
Bank of Ireland, 54 Dunnigold Place, Belfast, BT1 1DR
Bank of Scotland, The Mound, Edinburgh, EH1 1YZ
Barclays Bank Plc., Information Help line 0800 400 121
Clydesbank Plc., 30 St Vincent Place, Glasgow, G1 2HL
Coutts & Co., 140 The Strand, London, WC2
First Direct, Milishaw Park Lane, Leeds, LS11 0YF
HFC Savings and Loan, North Street, Winkfield, Windsor, Berkshire, SL4 4TD
Lloyds Bank, PO Box 112, Cannons House, Cannons Way, Bristol, BS59 7LB
Midland Bank, Griffin House, 41 Silver Street Head, Sheffield, S1 3WG
Royal Bank of Scotland, PO Box 51, St Albert’s Square, Edinburgh, EH2 2YE
Royal Trust Bank, Woldworth House, 46 Cannon Street, London
TSB (England & Wales), 103 Norfolk Street, Sheffield, S1 1ST
TSB (Northern Ireland), 4 Queen Street, Belfast, BT1 3JD
TSB (Scotland), Henley Duncan House, 120 George Street, Edinburgh, EH24 2TS
Ulster Bank, Ulster Bank House, Shaftesbury Square, Belfast, BT2 7DL
Yorkshire Bank, 20 Merrion Way, Leeds, LS2 8NZ

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