Here are a few of the gold stars you would need to earn to become a perfect borrower in the eyes of high street lenders.

You must be a homeowner, on the electoral role, married, have your own phone line, no late payments on loans, pay off at least a couple of credit card bills each month, no past financial problems, have full time employment, up to date on your store cards…..

Conversely, which applicants are likely to be refused credit?

Statistics show that 20% of applicants in the UK have had difficulty in obtaining credit. Your past financial history can have a big impact on the amount you will have to pay and whether you will be able obtain credit.

Having no financial history can also be problematic. Lenders are unable to reassure themselves that you have run your financial affairs smoothly in the past.

Many factors are taken into account when calculating your credit rating from the trivial to the very serious. Examples of the latter are CCJs, defaulting on a loan or becoming bankrupt. They can stay on your file for a maximum of six years and make it extremely hard for you to obtain a loan from high street lenders, especially when we are in the middle of a credit crunch. Naturally it will be difficult to obtain a mortgage or re-mortgage if you are already in arrears with your present mortgage repayments.

Late payments on a loan or credit card may not pose a problem, as long as they don't recurr regularly. Recurring late payments can be interpreted by lenders as a sign of financial weakness.

Summarising, credit problems in the past will prove to be expensive for you in the future. A low credit score will allow you to borrow relatively cheaply, whereas a high score means higher rates.

‘Headline' rates advertised in the newspapers, which have a low APR figure, are not necessarily the rates you will have to pay in practise. Lenders are required to promote a typical APR. Although this rate may still look attractive, it does not mean that a large proportion of applicants will receive a loan at that rate, as many will fall by the wayside through poor credit ratings.

You may have to approach a sub-prime or specialist lender if your credit rating is poor. Inevitably the rate will be high, as this group of lenders have to cover their costs if you default on your repayments.

A word of caution to consumers, who are looking for a bad credit loan. There are companies in the marketplace, who will ‘guarantee' you a loan, but in return will request a fee to process your application. Never accept a verbal promise, as once you have paid the fee, suddenly the loan could become harder to get or the APR jumps several points.. In addition your fee may never be refunded.

The sub-prime market has expanded enormously over the past few years, which has created competition between lenders. This competition has led to responsible lenders offering more realistic rates than we have seen in the past.

Underwriters deal with all kinds of problematic loan enquiries, so they will normally handle your enquiry sympathetically.