Why does good housekeeping mean bad credit score?

[smallbrown]

I recently tried to buy an O2 ?simplicity? mobile phone contract for my student daughter, only to find myself being rejected by O2 with the explanation that I was ?high risk? and should consult a credit agency about my credit score.

Panic! I pay my bills on the nail, and have no loans or debts anywhere, so naturally I assumed identity fraud. All O2 would say ? when I eventually got through - was that I?d been turned down by the credit agency, but being Saturday everything including the credit agency was shut, so I alerted my bank?s 24-hour fraud line and got my credit card blocked for safety.

On Monday morning, at some expense, I paid to see my credit score (after managing to unblock my credit card again, cos I only have the one and the credit agency wouldn?t let me register without one? Oh give me strength) and learned that my credit score had been fine ? ?above average for UK borrowers?, were the exact words of the nice young man in Manila.

Back to O2, who will ?try to respond within 10 days?, they say. Big of them.
By now I don?t want their rotten phone. But I do need an explanation to put on my now damaged credit record, to counter the fact that I can never again tick ?no, never turned down for credit?. Next time I need a loan or a mortgage, I could face serious problems.

I am, I learn, not the only careful householder to suffer this problem. Women, and it is often women, with either no history of borrowing or a clean score, seem more likely to be turned down for credit. The mother of a friend had an order for a sofa turned down by Argos. She raised Cain and got £200 and an apology. Attagirl!

It is of course possible that O2 think I?m ?high risk? because I already pay for three other mobile phones ? because crime bosses are really big on traceable cheap deals, (obviously). But although I don?t know what the phone ownership profile of the average drug dealer might be, I would have thought O2 might recognise the signs of a dull but efficient middle-aged mum buying phones for teenage children.

O2? Oh, no.

try orange instead!

I think you are taking it a bit too seriously to be honest.

Its not a personal insult.

Its done on (as far as I am aware) a sort of statistical points allocation type system that can be skewed by things such as you mention.

The fact that you only have one credit card probably doesn't help - its a credit score, therefore your ability to manage credit. It may mean you are good with finances in general, but having only one credit card doesn't necessarily mean you are "good with credit".

I doubt you'd really have trouble getting a mortgage - once again I am no expert on how that is gauged but its a slightly different set of criteria if I recall from my days sitting in on meetings for a company that had a mortgage broker attached to the business.

It sounds like you overreacted slightly to being turned down, and it might help if you work out what it is about your credit score that went wrong and work on that, even if its something silly like only having one credit card or having 4 phones - can you get them in your DH's name or are you a single mum? Maybe you can share it round a bit.

YANBU for feeling it is unfair though, its like bloody insurance, ridiculous sometimes what conclusions they might jump to from one little factor.

Agree with sloany, you are taking this a bit too seriously and you really won't have problems getting a mortgage because of this.

Credit rating for something like this tends to be more based on how likely you are to go overdue, live in overdrafts, basically end up paying stacks in interest.

They like people who are a bit behind and so are constantly paying interest, but not so behind that they are an danger of going bankrupt.

XP was useless with money and was constantly being offered loans by Lloyds etc as he had "One of their best credit ratings" - basically they knew he was a mug who'd take the quick cash and end up paying more for it (and making them money) in the long run.

They don't think you're a drug dealer! They just think you're too responsible to make them any money!

So does that mean that if you don't need to borrow because you manage your money well, you need to pay for credit that you don't require to improve your score?

This is a pretty good guide to how it works:

www.moneysavingexpert.com/loans/credit-rating-credit-score

"Credit rating for something like this tends to be more based on how likely you are to go overdue, live in overdrafts, basically end up paying stacks in interest.

They like people who are a bit behind and so are constantly paying interest, but not so behind that they are an danger of going bankrupt. "

No, postpay phone contracts really, really don't want that. They don't want to piss around with rejected DDs, they don't have the power to charge interest on overdue payments and they want a quiet life. A mobile phone company wants reliable, consistent payers. They're extending a significant line of credit, after all. And people who have no debt, no loans and no history may be that, or they may be people who have good reason to not trust themselves with credit and are an incredibly bad risk. All the mobile operators want is zero payment risk.

Unfortunately, whenever I hear people claiming to be a good credit risk on the strength of not using any credit, I'm reminded of people who fastidiously avoid off-licenses, pubs and sherry with their in-laws and claim this makes them sensible about alcohol. A decent credit score means you have a proven history of being a decent risk. Someone who has no history may be a brilliant risk, or may be a very bad risk indeed: no-one knows.

"So does that mean that if you don't need to borrow because you manage your money well, you need to pay for credit that you don't require to improve your score?"

Pay for your weekly shopping on a credit card and settle in full at the end of the month. Do this for a year. Sorted (for mobile operators, anyway: might not help you get other credit cards, but you don't want one anyway).

Now, you might respond "ah, but there's the risk that I might spend the money I need for the bill at the end of the month, and then where would i be?" To which the answer is "yes, exactly: a credit score is measuring, amongst other things, your ability to avoid doing just that".

yes indeed, my dad told me once that I should get a credit card and pay it off in full every month purely for the purpose of building up a credit rating.

We also have a credit card that we use to build up credit rating and pay it off at the end of the month. I am not sure if it is still the case but a credit card provides extra insurance for things.

"I am not sure if it is still the case but a credit card provides extra insurance for things."

Indeed. Any purchase over £100 is effectively a transaction from the vendor to the card company and then to you, so if the vendor fails to fulfil the deal you can go to the card company. Very useful for bankruptcy, poor service, etc. Consumer Credit Act. The banks have in fact sort-of agreed to voluntarily extend the same protection to debit cards, mostly to avoid a legal maelstrom over whether a debit card on an account that has an overdraft facility is governed by the Consumer Credit Act even if the overdraft is not active. But best to stick to credit cards, where the legislation is clear-cut, because in the case of a debit card on an account that does not have an overdraft facility, or where the facility is dormant or long unused, it's not clear that the law actually applies (well, it's fairly clear it doesn't, but no-one wants to test it).