In a world stricken by a financial virus at present, borrowing has become harder than ever before in my lifetime. This is just the moment I decided a loan is exactly what I need to bolster my employability and follow my career aspirations by undertaking further education. As a graduate, struggling in the difficult post-2008 job market, I applied for a Personal Career Development Loan to get onto my proposed course, but was declined.
I’ve never been the sort of person that takes high risks when it comes to money, never having had had a credit card, or borrowed off anyone other than the Student Loans Company. Despite my cautious outlook, I find myself in the situation where I can’t get a loan. The reason, apparently, is my credit rating.
Now anyone who has read a few blogs on moneysavingexpert knows that with bad credit comes judgment, and often fair, by financial institutions which, in turn, hinder one’s prospects of getting mortgages, loans and credit cards. Nevertheless, why does someone who has no credit history get rejected? Who are the banks to tell those who have never borrowed that they are a high risk, what evidence do they have?
I began to ask myself why I might be getting such negative reviews, intrinsically citing one-off missed payments or late bills as my misgivings. Following this, I signed up to Experian to check my own personal credit score. ‘Fair’, was the verdict I was given.
After further investigation, I learnt that fair, in this day and age, is not good enough to get a good deal on a credit card. So in order to get a worthwhile deal, you have to take on a credit card which is not a good deal to prove your worth.
This isn’t something I’m particularly keen to do, the sole and obvious reason being that most credit cards available to people in my position are not value for money. Even if I was to bite the bullet and take out a credit card with a high APR and few benefits, I would need to have it for a fair while to demonstrate that I’m a consistent and reliable client.
On the other hand, an argument I came across was that companies reward ‘good customers’ with better deals, which seems a fair and honest sentiment. The issue that was slightly more underhand, however, was just who the companies decide are good customers.
One would assume that a good customer is someone who pays their bills on time, rarely misses a payment and never gets in financial trouble. This isn’t necessarily true, and although banks obviously don’t want high risk customers who will never repay the loan, they thrive on medium risk customers – average people who make the odd financial mistake.
The reason for this is, quite simply, profit. They want people to default on payments so that they can spank their loyal customers with the full force of their late payment charges. If everyone paid back their debts on time, there would be a smaller profit margin and the big bucks wouldn’t be in the hands of the big banks.