Martin Lewis shows how lenders really asses you - it's not just on credit score

08 November 2023 , 12:29

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Martin Lewis shared top easy-access savings accounts on a new episode of Money Show Live (Image: ITV)

A high credit rating is generally considered to be the most important factor when applying for a loan and to make sure you keep your financial position in good shape.

But money guru Martin Lewis claims we shouldn't get too hung up on this and revealed there is another vital aspect to your personal situation that creditors look at when assessing whether to lend you money.

During a financial phone-in on This Morning, one woman called the ITV show to ask why, despite having a high credit score, she keeps getting refused credit. She explained that she has increased her overdraft and was also refused a renewal on her mortgage after she was made redundant while on maternity leave.

The frustrated viewer asked: "I've never had a bad credit rating before I always pay off everything in full. What can I do to improve it?" Martin began by explaining how credit ratings work: ""Well look we just have to get away from being hung up too much on our credit scores. You do not have a credit score in the UK. The one that you're given by the UK credit reference agencies is just their indication of a loose guide to what a typical company might look at you if it was only looking at your credit history," he said. "Now the fact that there are three different credit reference agencies and they don't all score the same, shows you you don't have a credit score. So don't get too hung up on small movements on that."

He went on to state that income is the vital factor lenders will look at to assess suitability for any kind of loan and that if you are unemployed that is going to be more important than your credit rating. "Let's be extreme on this," he said. "If you had no income and a perfect credit score and you wanted a loan, you're almost certainly not going to get it because you can't pay it back."

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He pointed out that her redundancy was probably the issue: "So when you tell me you've been rejected, what you haven't told me, is the crucial factor. You talked about being made redundant. Well, if you've been made redundant and you don't have a job, and you don't have income even with a great credit score, it is going to make getting credit much more difficult."

Martin advised the caller to get her files from all three agencies and go through them meticulously to check for any mistakes, such as still being listed as living at a previous address, which could get her knocked down due to fraud scoring.

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