Have you been refused credit?

Man using phone

Being refused credit isn’t just disappointing; it can often put a stop to personal plans, making things difficult for you and maybe even those around you too. When you have a credit application rejected, your next steps are incredibly important. Fail to investigate the reasons behind the refusal and you could set yourself up for further rejection, impacting your credit score and potentially limiting your future access to credit in the process.

If you don’t have a lot of debt and pay all your bills on time, you might be struggling to understand why you’ve not been accepted for a recent application. It’s always a good idea to check your credit report in advance of any borrowing plans but if it slipped off your to-do list this time round, Credit Angel has simple and easy to follow report that could help you understand why you may have been refused credit, and help you to put a plan of action together so you know what to do next.

Refused credit or refused a loan?

There are lots of reasons why you could be refused credit and it’s not always as simple as not having a high enough credit score or being someone who has a lot of debt already, though these can be common factors. From not being a favoured target customer for the lender, to making accidental mistakes on your application, here are some of the common reasons that can lie behind credit card, loan and other lending refusals:

Not meeting the criteria

Did you read the small print before you pressed apply? Lenders often outline particular criteria applicants must meet to be considered for their product. For example, you may need to earn over a certain threshold in order to apply. If you fail to meet these requirements your application will therefore be rejected.

Application errors

Technology can be great but hit one wrong digit and you could make an application error that’s hard to spot. If you type in something such as your date of birth or address incorrectly and it won’t match up with your credit report, leading to a refusal.

High levels of debt

If you already have a lot of borrowing, even if you’re making payments on those accounts on time, lenders may decide that you already have all the debt you can comfortably manage.

Lots of credit available

Do you have access to credit that you’re not currently using? Maybe you have several credit cards but only use one or you have a few catalogue and store cards too? When considering credit applications lenders will take into account the total value of the lines of credit you have open to you. This is because you could theoretically decide to max out all of the credit you have all at once and if you did so, you may not be able to afford to meet all of your payments.

Not on the electoral register

Are you registered to vote at your current address? You don’t have to vote but being registered can help to prove your address to lenders who may otherwise have trouble verifying where you live. It’s also worth bearing in mind that lenders don’t look favourably on a high volume of address changes as this can make your situation appear less stable.

Errors on credit report

Mistakes on your credit report can easily cause issues when you apply for credit. This could be as simple as an old credit card that’s been paid off and closed still showing on your account or an address being recorded incorrectly. However, errors can sometimes be an indication that you’ve been a victim of identity theft. This may manifest as credit accounts you’ve not opened being listed in your name, addresses you’ve not lived at being associated with you and late payments for credit a criminal has taken out in your name. If someone does assume your identity for the purposes of committing fraud, if they make multiple applications this can also hurt your report even if they were not accepted as it can make you appear more desperate for credit.

A rush of applications

As above, making a flurry of credit applications in a short space of time can be of concern to credit providers who may consider it a sign that you’re experiencing money management problems. These don’t need to be applications for the same kind of credit either, so rather than apply for a new mobile phone, mortgage and credit card close together, it’s usually best to spread out applications.

Late payments

Banks, building societies, store cards, catalogues, phone and utility providers all share information with credit reference agencies. If you’ve made late payments on any of these accounts within the last six years it will be highlighted on your credit report and could put lenders of.

Past debt problems

If you’ve struggled to manage your money in the past this can unfortunately continue to have an impact even after you’ve corrected your borrowing behaviour and paid off debts. If you’ve defaulted on a debt, had a CCJ that’s not been paid within the first month or been made bankrupt, it will show on your credit report for six years.

Little credit history

You may think you’re a good borrowing prospect, but if you’ve had little experience of credit so far there will be little information about you to analyse, this means it can be hard for lenders to predict whether you are creditworthy or not.

Credit refusal next steps

In the first instance, it’s always a good idea to ask the lender who has refused your application for feedback. They don’t have to tell you why they’ve rejected your application but they should tell you which credit reference agencies they review information from when making their decision. Next, you can request a copy of your statutory credit report from the relevant agency for which you’ll be charged a £2 admin fee. This won’t show your credit score with the agency but will allow you to check for any errors and highlight possible areas for improvement such as debts you could pay down before making further applications.

Sign up for a free 30-day trial here at Credit Angel, and as part of our credit report service, we will give you indicators on how you could improve your score. You’ll have access to telephone advisors who can help you to understand your report, so that you can take sensible steps to improve your credit rating before making future applications. We can also contact the credit reference agency on your behalf about any errors and ask them to be corrected.

If you’ve been refused a loan everywhere, your plan of action may differ from if you’d had one credit card application rejected, though you could consider making use of the Credit Angel matching service in both instances. Using a soft credit search combined with the answers of a few quick questions we will search products and lenders to find loans or credit cards that meet your needs and that you’re more likely to be accepted by. If you already have high levels of debt or you’re struggling to meet your payments, adding to your borrowing is not likely to help your situation. Instead, try seeking free and impartial advice from organisations such as the Money Advice Service.