Turned down for a credit card? Knowing ‘why’ can help you move forwards and get approved in the future.
No one likes getting turned down for credit, especially if you’re given little reason as to why. If you’re confused about why you’ve been rejected, you’ve come to the right place – we’ve delved into the common reasons why credit companies say ‘no’ and what your next steps could be.
1) You’ve never borrowed before
To build your credit and boost your chances of getting accepted, credit companies like to see proof that you’ve borrowed before.
This can make getting accepted for your first credit card a little tricky. If you’re caught in a trap of applying and getting turned down due to your lack of borrowing, it can actually make things worse.
Your next step: Take some time to read up on lenders who are likely to accept thin credit histories and use ‘eligibility checkers’ to see if you’re likely to get a ‘yes’ before you apply.
2) You’ve missed payments in the past
Imagine you lent a friend a tenner. If they didn’t pay it back, you’d probably think twice about lending them money again, right?
Well, banks see it in a similar way. If it’s flagged up on your credit report that you’ve missed a payment, like a bill for council tax or a credit payment, they might worry you’ll do the same thing with them.
Your next step: The good news is that credit reference agencies typically let go of information after 6 years. This means that your mistakes aren’t set in stone and, after the mistakes have been removed, you can start with a clean slate. Until then, you could look to improve your credit with a ‘bad credit’ credit card.
3) Your details don’t match up
So you’ve got a great credit history, made all of your payments on time and you’re on the electoral roll… but then you get rejected! What’s that all about?
It could be something as simple as having outdated information (like an old address) listed on your credit file. Lenders will check your application against the details on your credit file – and if they don’t match up, they could reject your application.
Your next step: Luckily, this is a problem easily solved. Simply check your details on the three credit reference agencies to make sure they’re all up-to-date. If they’re not, you can contact the agency and ask them to update the information for you.
4) You can’t afford it
If you’ve got a good credit rating and made all of your payments on time in the past, you might expect to pass your credit application with flying colours.
While having a positive credit history is only ever a good thing, it’s not the only thing lenders look for. They’ll likely ask you how much you earn on your application, as well as how much you spend on things like bills.
If you’re not left with lots once the bills have gone out, they might decline your application if they think you’ll struggle to afford it.
Your next step: The obvious answer here is to simply ‘earn more’ but, of course, it’s never that easy. If that’s out of the question, you could see if you can team up and make a joint application for credit with someone you trust. The additional income could boost your eligibility, as your affordability will look better.
With credit cards, there’s only ever one person responsible for the payments, but you can often add multiple cardholders to the account.
5) You’ve got too much credit
If you’ve been accepted for a credit card or two in the past, it doesn’t automatically mean you will again.
In fact, having more credit in your name could lead lenders to believe that you’ll struggle to keep on top of all your credit payments. Even if you’re not using the credit, they could still worry you’ll spend all of it at once and struggle to repay it all.
Your next step: If you’ve got any old credit or store cards, you could close them down. Not sure how to check? Look at your credit file and they’ll all be listed there. Even shutting down an old mail order subscription or direct debit could help boost your eligibility.
A ‘no’ isn’t the be-all and end-all
So, there’s five common reasons you could be rejected for credit. As we’ve seen, getting a ‘no’ doesn’t always mean it’s the end of the road – it’s often just a small setback which can be easily overcome.
Not sure why your credit score’s taken a plunge? It could be thanks to one of these unexpected reasons!
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.