How lenders decide whether to give you credit

This advice applies to Scotland. See advice for See advice for England, See advice for Northern Ireland, See advice for Wales

When you apply for a loan or other type of credit, such as a credit card, the lender has to decide whether or not to lend to you. Creditors use different things to help them decide whether or not you are a good risk.

On this page you can find out:

  • how your credit rating is decided

  • what information a creditor can find out about you to help them decide whether to lend to you

  • what you can do if you are refused credit, including how to correct wrong information on your credit reference file

  • how to get a copy of your credit reference file

  • how fraud can affect your credit rating

  • how to get credit if you’ve got a low credit score.

To find out more about taking out a loan or other types of credit, see Further help and information.

Credit scoring

Credit scoring is a system used by creditors to decide how much of a risk it is to lend to you. When you apply for credit, you complete an application form which tells the lender lots of things about you. Each fact about you is given points. All the points are added together to give a score. The higher your score, the more credit worthy you are. Creditors set a threshold level for credit scoring. If your score is below the threshold they may decide not to lend to you or to charge you more if they do agree to lend.

Different lenders use different systems for working out your score. They won't tell you what your score is but if you ask them, they must tell you which credit reference agency they used to get the information about you. You can then check whether the information they used is right.

Because creditors have different systems to work out credit scores, even if you’re refused by one creditor, you might not be refused by others.

You may be able to improve your credit score by correcting anything that is wrong on your credit reference file.

What information is kept by credit reference agencies

Credit reference agencies are companies which are allowed to collect and keep information about consumers' borrowing and financial behaviour. When you apply for credit or a loan, you sign an application form which gives the lender permission to check the information on your credit reference file. Lenders use this information to make decisions about whether or not to lend to you. If a lender refuses you credit after checking your credit reference file they must tell you why credit has been refused and give you the details of the credit reference agency they used.

There are three credit reference agencies - Experian, Equifax and TransUnion. All the credit reference agencies keep information about you and a lender can consult one or more of them when making a decision.

The credit reference agencies keep the following information:

  • The Electoral Roll. This shows addresses you've been registered to vote at and the dates you were registered there

  • Public records. This includes court judgments, bankruptcies and in England, Wales and Northern Ireland, IVAs, Debt Relief Orders and Administration Orders. In Scotland it includes decrees, sequestration orders, DAS Debt Payment Programmes and Trust Deeds

  • Account information. This shows how you have managed your existing accounts such as your bank account and other borrowing. It shows lenders whether you have made payments on time

  • Home repossessions. This is information from members of the Council of Mortgage Lenders about homes that have been repossessed

  • Financial associations. This shows details of people you are financially connected to. For example, it includes people you've applied jointly for credit with or who you have a joint account with

  • Previous searches. This shows details of companies and organisations that have looked at information on your file in the last 12 months

  • Linked addresses. This shows any addresses you have lived at.

If there has been any fraud against you, for example if someone has used your identity, there may be a marker against your name to protect you. You will be able to see this on your credit file.

How long information is kept by credit reference agencies

Information about you is usually held on your file for six years. Some information may be held for longer, for example, where a court has ordered that a bankruptcy restrictions order should last more than six years.

If information is held for longer than it is supposed to be, you can ask for it to be removed.

Read more about bankruptcy.

Get a copy of your credit reference file

You can ask for a copy of your credit reference file from any of the credit reference agencies. If you have been refused credit, you can find out from the creditor which credit reference agency they used to make their decision. Your file shows your personal details such as your name and address, as well as your current credit commitments and payment records.

You have a right to see your credit reference file - known as a statutory credit report. A credit reference agency must give it to you for free if you ask for it. 

Credit reference agencies may offer other more expensive services where you are sent a copy of your credit reference file on a regular basis. If you're thinking about signing up to this kind of service, make sure you read the details. Check it's what you want before you agree to it.

If you sign up to a free trial and decide it’s not right for you, remember to cancel before the trial ends or you might be charged.

If the information on a credit reference file is wrong

If you think any of the information held on your credit reference file is wrong, you can write to the credit reference agencies and ask for it to be changed. But you can't ask for something to be changed just because you don't want lenders to see it.

You can also add extra information about your situation. For example, you can add information if you have had a past debt but have now paid it off. This is called a notice of correction. This might help you if you apply for credit in the future.

How fraud can affect your credit rating

When lenders search your credit reference file, they may find a warning against your name if someone has used your financial or personal details in a fraudulent way. For example, there may be a warning if someone has used your name to apply for credit or forged your signature.

There might also be a warning against your name if you have done something fraudulent.

To be able to see this warning, the lender must be a member of CIFAS. This is a fraud prevention service used by financial companies and public authorities to share information about fraudulent activity. CIFAS is not a credit reference agency. The information it provides is only used to prevent fraud and not to make lending decisions.

If there is a warning against your name, it means that the lender needs to carry out further checks before agreeing your application. This may include asking you to provide extra evidence of your identity to confirm who you are. Although this may delay your application and cause you inconvenience, it is done to ensure that you don't end up being chased for money you don't owe.

How you will know about a CIFAS warning

If there is a CIFAS warning against your name you will be able to see this on your credit file. If you are an innocent victim of fraud, CIFAS members must also send you a letter telling you that there is a CIFAS warning against your name.

A CIFAS Member is not allowed to refuse an application or cancel a service you are getting, such as an overdraft agreement, just because there is a warning on your credit reference file. They must make further enquiries to confirm your personal details before making a decision.

You can get tips and useful information from CIFAS on how to avoid identity theft and what to do if you are a victim of it.

You can still get credit if you have a low credit score

If you have a low credit score, a lender may ask for a guarantor. A guarantor is a second person who signs a credit agreement to say they will repay the money if you don't. This can be a way you can borrow money or get credit when on your own you might not be able to.

If you are using a guarantor to borrow, they'll also have to give information about their personal details so that the creditor can check they're credit worthy. Try to pick a guarantor who is likely to have a good credit score.

The guarantor is responsible for paying the money back if you don't and they have the same rights as you under the credit agreement. For example, the guarantor should get the same information before and after signing an agreement.

If you are thinking about agreeing to be a guarantor for someone else, make sure you understand what you are agreeing to. Read all the small print in the agreement before signing it.

If you're refused credit

If you're refused credit, you may be able to do one of several things.

Look at other ways to raise the money

If you're having problems with your outgoings, you might be able to get help with your bills. You could also use a budgeting tool to see exactly where your money goes each month.

If you need money for a particular reason that you can't do without, there may be other ways you can raise the money - check if you can get extra help if you're on benefits or your benefits have stopped.

If you are on a low income and struggling to afford an essential item, such as a fridge or washing machine, you may be able to get help from a charity or other organisation that helps people.

Clean up your credit reference file

Check your credit reference file before you apply for credit or a loan so that you know whether there are any facts about you which might affect your credit score. Facts which might affect your credit rating include court judgments or a poor payment record. Get any incorrect information changed or removed and add a correction notice to explain any special circumstances.

Apply to other lenders

You need to be aware that if you apply to lots of lenders this will leave a trail on your credit reference file. This may affect your credit score as lenders may think you already have lots of borrowing or have been refused by other creditors.

If you are finding it difficult to borrow from mainstream lenders such as banks and credit card companies, check if there's a credit union in your area. Beware of borrowing from illegal money-lenders (loan sharks).

For more information about credit unions and loan sharks, see Types of borrowing.

Further help and information

For more information about borrowing money and getting credit, see Borrowing.

You may also find the following information helpful:

The Money Advice Service

The Money Advice Service website has lots of useful information about borrowing and managing your money.

Credit reference agencies

Credit reference agencies are companies which are allowed to collect and keep information about consumers' borrowing and financial behaviour.

The 3 credit reference agencies are:

Experian -

Equifax -

TransUnion -


The CIFAS website has information about what CIFAS does as well as a list of its members and details of its complaints procedure.

Action Fraud

Action Fraud's page on identity theft has useful information about all aspects of identity fraud.

Registry Trust

Registry Trust operates the public registers of court orders for the UK. You can use their online search to check whether you have a court order registered against you.