Why have I been refused for a debit card as a result of a credit check?


This is a question that has been asked by a number of people. After all, the simplest way to look at things is that it is your money in the bank account. What gives the banks the right to refuse providing you with a debit card?

There are 2 issues that need to be considered here:
a)         Your Low Credit Score
b)         The Merchant Process – How Debit Cards Work

Low Credit Score


First and foremost, you have been refused a debit card as a result of having a poor credit history that has resulted in a low credit score. This is an issue for banks, which we will go on to describe in further detail below.

Before you do anything else, you really need to establish how your bank or building society compiled your credit score. It may be a case that internal (behavioural) data was used to create your credit score. The key thing that you need to establish is whether any credit reference agency data was used to compile your credit score. If so, which credit reference agency, or agencies were used to give you a credit score? It is also worth asking what weighting this credit reference agency data was given. They may not tell you this part, but if they do, it will at least help you put together a picture as to the reasons for your refusal.

Once you are armed with this information, you are then able to choose which credit reference agency to get a credit report from first. We recommend obtaining credit reports from all 3 credit reference agencies (Experian, Equifax and Callcredit), but for the purposes of this exercise, you should go straight for the credit report that attributed to you being given a low credit score and refused for a debit card.

Once you are in possession of your credit report, you can then look to establish why you have a low credit score. You may already know of outstanding debts, missed payments, not being on the electoral roll, or other issues that could contribute to you having a poor credit profile. However, there may also be elements contributing to your poor credit score, which you are not aware of. For example, you may have been a victim of identity fraud. Therefore, you must ensure that all credit reference agencies (Experian, Equifax and Callcredit) hold the correct data on you. You may have some work to do still to build your credit rating.

Ok, so we’ve established that you have a low credit score and the reasons for it. Now lets look at why this is a factor in you being refused for a debit card.

The Merchant Process – How Debit Cards Work


There are 3 key parties involved in any Merchant / Card transaction. These are:

1) The Merchant - The Shop you are purchasing from
2) The Acquirer - This is usually your bank - sometimes the service is provided by other card providers.
3) The Customer - This is you.

At the point you make a purchase in the shop, all you are effectively doing is making a promise to pay. The shop only gets their money by selling the transaction to the acquirer and getting reimbursed by them.

Now, here’s the important bit. The acquirer then has to go and get the money from you. If you don’t have the money in your account, then the acquirer becomes out of pocket.

In most instances, the acquirer is only out of pocket temporarily as they are able to get their money back from the shop again via a chargeback. Obviously the acquirer wants to negate the number of instances in which they have to do this. Therefore, they will only offer debit cards to customers who are of a low credit risk (people that have money in their account and manage their credit history responsibly).

Order your credit report now and take action to improve your credit score. This will help ensure that you are able to obtain a debit card in future.


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