Credit Score Mythbuster: Is There Any Such Thing As A Credit Blacklist?

Ah, the credit blacklist. Lots of us think it’s gotten in the way of us getting the credit we need at some point. After all, when you’re pretty sure you’re doing everything right and are a good person to lend to, what else could be blocking you from accessing credit? But, is blacklisting people or addresses how access to credit is decided? If you’re on the credit blacklist, how do you know? And how do you get off it? We’re setting the record straight, once and for all.

The credit blacklist does not exist.

That’s right. There’s no such thing as the credit blacklist. But it’s one of the most commonly believed credit myths out there. In fact, in a recent CredAbility quiz, 60% of participants thought that if someone who lived at their address before them was in debt, then this would cause their address to be blacklisted and block them from accessing credit. Thankfully, that isn’t how it works.

So, what is stopping you from getting credit?

Thinking you’d been blacklisted somehow likely gave you a frustrating but easy reason why you weren’t approved for credit, or only had a few options last time you compared loans or credit cards. Since the credit blacklist doesn’t exist though, it can’t be the culprit. So, what is? There could be several reasons your applications have been turned down or your choices are limited, and you can find most of them in your credit report.

• You don’t have much credit history. Lenders look at your past borrowing behaviour to predict what you’re likely to do in the future. If you don’t have a lot of history for them to analyse, this can mean they think you’re too much of an unknown to say yes to.
• You have a credit history, but it’s not great. So, we know that lenders look at your past borrowing behaviour to predict how likely you are to repay your future borrowing. If you have late payments, defaults or County Court Judgements in your past that indicate you’ve had trouble paying back your borrowing, this makes lenders dubious about how likely you’d be to pay them in the future.
• You have an IVA, or are on a debt management or “reduced payment” plan. Entering into agreements, formal or informal, where you pay your lenders a reduced amount each month until your debt is cleared indicates to new lenders that you’ve been struggling to afford your existing borrowing, and so can’t afford to take on any more right now. If you can afford a bit more, that money should be going towards clearing your existing debts more quickly.
• You’ve been applying for a lot of credit recently. Every time you apply for a loan, credit card or other finance agreement, unless you’re explicitly told otherwise, it’ll register a “hard search” on your credit report that lets anyone else you apply with see that you’ve also applied to them. This hard search is done whether or not you end up borrowing the money you applied for. A lot of applications and hard searches in a short space of time (we define this as 3 or more in the space of a year) can raise a red flag for lenders.
• You can’t afford to repay the debt. Lenders have a responsibility to make sure that if you borrow from them, you can afford to pay it back without having to go without essentials or miss payments on other borrowing. They do this by comparing the income information you provide in your application with your credit report. If they believe you’d be overstretching yourself, they may well turn you down. This can be frustrating if you’re sure you could afford it, but, just like the pub landlord cutting you off when they think you’ve had too many (even when you disagree), it’s only because they’ve got your best interests at heart!
• The lender can’t confirm your identity. Lenders like to be sure that you exist before they agree to lend you money. They do this by checking your credit history and sources like the electoral roll. The more info there is out there about you, the more likely you’re a real person. If you’re not registered to vote, or if you’ve recently changed your name, then the lender may not be able to gather enough information about you to confirm your identity.
• You’re just not what they’re looking for. All lenders have unique requirements for what they’re looking for in their customers that they choose for themselves. For example, some lenders advertise themselves as specialists in lending to people who are borrowing for the first time. So they might find it strange to receive an application from someone with a long, good credit history, and may well say no to you, simply because you’re not the type of customer they’re looking for.

Financial associates

Financial associates – people to whom you’re linked financially through joint accounts – can also be the reason you’re turned down for credit. They’re worth pausing to talk about in a bit more detail than other reasons your applications might be rejected, because they’re the closest you’ll get to being “blacklisted” because of somebody else’s actions.

You become financially associated with someone by both being named on financial or household accounts that are included in your credit report. So, if you have a joint bank account with someone, are both named on your electricity and gas bills, or have a joint credit card, mortgage or loan, you could be financial associates.

Being financially associated with someone is the only way their actions and credit history should have an impact on your own ability to be approved for credit. Their information won’t appear in your credit report – and so can’t affect your credit score – but lenders will bear in mind that you’re financially linked to someone else and how much debt that person has when deciding whether to approve applications that you make by yourself. This is because the commitments you share with your financial associate could all fall to you if they ever weren’t able to split the cost with you. And if they were struggling, you may also feel obligated to help them with their individual debts, impacting your ability to afford your own.

Seeing someone else’s information in your credit report

If you’re seeing information in your credit report that doesn’t belong to you, then you might think that it’s there because of the blacklist. But remember, the credit blacklist doesn’t exist. If you’re seeing accounts or information in your credit report that you didn’t open, or contain information belonging to somebody else, then this could be caused by one of two things: fraud, or a mistake on the part of the credit reference agency who’s put your report together.

• Fraud: If somebody has used your personal details to apply for credit or open accounts without you knowing, then you will likely be able to see these accounts in your credit report. If the individual who opened the account hasn’t been repaying what they borrowed, then this could be making you look bad to other lenders who don’t know that this wasn’t you! If you find any accounts in your credit report that are registered to your details, but that you didn’t open yourself, it’s important that you speak to the companies those accounts are with to make sure they’re treated as fraud and removed from your credit report so that they can’t affect you any more.
• Other people’s information: Occasionally, if you have very similar details to somebody else, credit reference agencies can mistakenly believe that you’re the same person. For example, if two people have exactly the same name and date of birth, then it’s possible for them to get muddled up, or for computer to systems to think they’re not two people, but one. Or, imagine that you moved out of your home, and the person who moved in after you had the same name as you, so you share that and a portion of your address history. That’s pretty confusing for credit reference agencies. If you see any accounts in your credit report that not only weren’t opened by you, but you’re certain belong to someone else, then have a chat with the credit reference agency that’s provided you with your report. They should be able to help straighten it all out and clean up your report, so the only information you see is your own.

Improving your chances of getting credit

Now you know that there’s no such thing as a credit blacklist holding you back from getting credit, you also know that your ability to get credit is in your hands. And, if you do the right things, there’s no reason why you can’t be approved for all the credit you need in the future. These are our top tips to improve your chances of being approved:

• Pay your bills on time, every time: From the big ones like your rent or mortgage to the little ones like your phone bill, make sure every bill that comes your way is paid in full and on time, every time. Setting up standing orders or direct debits to pay your bills automatically when they come in can be a great way to do this if you’re prone to forgetting things!
• Keep your credit applications to a minimum: As we mentioned earlier, three applications for credit in the space of a year is considered a lot. Sometimes this will be unavoidable – for example if you move house and have all your new utilities and broadband accounts to get set up – but where you can, spread your applications out and keep them to a minimum. If you’re curious to see what you’re eligible for or what offers are available to you, look for lenders and comparison sites that let you have a look without affecting your credit score.
• Register to vote: If you’re eligible to vote in the UK, make sure you’re registered! Being on the electoral roll helps lenders to verify your identity and can improve your chances of being approved. You don’t have to cast your vote in elections if you don’t want to, and you can opt out of the “open register” to keep your details from being added to mailing lists, too.
• Sort out mistakes: If anything in your credit report doesn’t look right, don’t sit and think it probably isn’t making a difference, challenge it! If it turns out to be right, then at least you know, and you might learn something about the inner workings of the finance world at the same time. If there is something wrong, you’ll get it sorted and make sure the only info out there about you is the truth. Either way, you win!
• Be patient: If you’ve made mistakes or have fallen into debt in the past, then even if you’re out the other side of it now, it might be a while before lenders see what you see – that you’re not going back there. And, if you put yourself in a lender’s shoes, you’d probably agree that they’re right to be cautious about you! All you can do is keep doing what you can to build a positive credit history and be patient. As they say, good things come to those who wait!