It is a case of the past catching up with you. You may be a good bet now - but were you in the past? Past and present credit worthiness is established and this is used to predict your creditworthiness in the future.
There are two main credit reference agencies that all lenders consult before they make any lending decisions, Experian and Equifax. These agencies record a number of details about you based on your current and previous addresses in the last three years. The details include:
1. Electoral Roll: Whether you are on the electoral roll. Some lenders require you to be on the electoral roll before they can lend.
2. County Court Judgements (CCJs): These occur when you have been taken to court by a debtor to enforce payment of a debt and the debtor won the case. The court holds this information for six years from the date of the judgement. They also record if you subsequently paid the judgement.
3. Individual Voluntary Arrangements (IVAs): This is where you have become bankrupt and unable to pay your debts. Once you have been made bankrupt and the debts have been settled then you become a discharged bankrupt. Only once you have been discharged can you have any hope of obtaining credit again. You are automatically discharged after six years.
4. Credit Accounts: These are all your loan accounts that have been active in the last six years and whether you have ever defaulted on them. Typical accounts are your mortgage account, credit and store card accounts and personal loans.
5. Repossessions: Details of any house repossessions that have ever occured.
6. Previous searches: These are previous credit searches by other lenders that you have made a credit application with.
7. Gone Away Information Network (GAIN): This is where you have moved home and not forwarded on the new address and not satisfied the debt.
8. Credit Industry Fraud Avoidance Systems (CIFAs): This is where the lender suspects fraud and just flags it up. You cannot be refused credit based on a suspicion.
The key factors are CCJs and defaults. If you have any CCJs and defaults (points 2 & 4 above) you will be restricted to adverse lenders who charge higher arrangement fees and interest rates. There is one key thing you should know when filling up your form for any type of credit - do not lie. If lenders find out they will demand repayment in full and they could inform the police of fraud - the charge being obtaining finance by deception.
The credit reference agencies are becoming more and more sophisticated. They log every bit of information you put on every credit application and if you submit an application that was slightly different from a previous application they will flag it up.