If you have refused credit and you are not sure why, it can leave you with a number of unanswered questions. It is likely that one of these questions is going to be what can you do next.
Before you decide to make any further credit applications to get a loan, you should make sure you have determined the cause of your credit refusal. By not checking these details first, you could end up harming your credit score and reducing your chances of getting approved for credit.
Creditors and lenders will look at your credit history before making a decision to approve or decline your application. Lenders will obtain your credit report from one of the three main credit reference agencies in the UK as well as use additional information (for example, if you have been a customer with them in the past).
After getting this information, the lender makes the final decision to approve or refuse your application.
Reasons can vary among applicants but the most commonly cited are:
It is important to remember that all lenders are different, with their own set of requirements and eligibility criteria for their forms of credit. This is why it is worth asking the lender directly why you were refused.
This usually happens if you are not on the electoral roll or have recently changed name or address and did not inform the lender. If either of these are the case, it can be easily solved.
Having no evidence of being able to successfully make loan repayments can lead to credit refusal. Lenders want to mitigate risk, so they will be looking for proof you can repay creditors.
If you have one of these or a current Debt Management Plan, a lender may refuse your application as it suggests you may not be able to afford more debt.
If you make a lot of applications for credit in a short space of time, this can signal alarm bells to the lender that you are in financial difficulty.
A simple error can sometimes be the reason why your application was refused, as it may hinder the lenders’ ability to check your identity.
If you are financially linked to someone (such as a relative or partner) who has a history of bad credit, this can affect your own credit score too.
Some lenders will only be looking to lend to those with high or low incomes, and you may not fit into this criteria.
Your current employment and salary can help determine whether you have a stable income. This isn’t on your credit report but can be important to lenders when deciding to approve or decline your application.
To increase the likelihood of being improved, you should make some changes such as finding ways to improve your credit score. This will reduce your chances of being refused. Here are our top tips: