Your comments help us improve our websiteSend your feedback
Rejected for credit; what must your lender tell you?
We know how frustrating it can be when your application for new credit, whether that’s a credit card, loan or mortgage, is turned down. Perhaps the most irritating thing is that you don’t usually know why your application is rejected. So, does the lender have to tell you?
Unfortunately the answer is ‘no’. You can ask them for a reason, but they don’t have to give you one – although they might provide you with some guidance.
However, before you lose hope, being rejected for credit usually comes down to just a handful of factors. Read on to find out what these are.
Out-of-date personal details
You’ll kick yourself if this turns out to be the reason why your application was turned down, but failing to update your personal details can be all it takes to be rejected for credit. If you’ve recently moved house and you haven’t updated your address across all your accounts, for example, this could cause problems, so be certain everything’s up to date before you apply.
The Electoral Roll lists the name and address of everyone in the UK who is eligible vote. It is also what lenders look to when they want to check that the person applying for credit is who they say they are.
If your details are not listed here, you must do something about it, as this will stand in the way of any borrowing you apply for. It’s pretty easy to do, and you can also update your details on it, if you move for instance. You can register to vote here.
Poor credit history
Your credit history is your record of borrowing and paying the money back over the last six years. It makes sense that when you apply for credit, before they lend to you the lender wants to be sure that you’re likely to pay it back again, and one of the ways they can do this is by accessing your credit history. If this shows you have a record of responsible borrowing, this will stand in your favour - but if you don’t, your application may wind up being rejected.
Did you know that you too can see your credit history? Sign up to one or all of the three UK credit reference agencies, CallCredit, Experian and Equifax, and you can see a list of all the financial accounts you currently have open as well as the ones that have been active during the last six years – even if they are now closed.
A credit history that shows missed or late payments might put a new lender off. And if you have lots of lines of credit open to you they may also be wary that lending you any more will put you under too much pressure – even if you’re not currently using some of the credit listed. The best course of action is to close any credit accounts you’re not using before you apply.
If you have a poor credit history, it doesn’t necessarily mean you’ll be rejected by new lenders, but you might have to pay more to borrow. You can find tips on improving your credit history here.
Zero credit history
When you’ve never borrowed money, it’s not unreasonable to think that your credit history is perfect. This isn’t the case though.
As we said, your lender wants to see proof that you are able to borrow responsibly, and if you’ve never borrowed, they don’t have that. But again, a non-existent credit history doesn’t mean you’ll never be able to borrow. There are lenders who specialise in providing credit to borrowers in your position – although be aware that you may be charged more interest than their advertised rate. However, if you stay on top of your borrowing and show that you can manage it responsibly; this should open you up to more lenders and deals in the future.
You may not have considered this, but it might not be your credit history that’s resulting in you being rejected for credit. If you have what’s called a financial association with another person, and they have a poor credit history, this could affect you.
Financial associations include joint bank accounts, mortgages and any other shared borrowing you have. These will show up on your credit history for up to six years after the accounts were closed, so even if you’re no longer in contact with that person, their credit history could still impact yours.
You’re not what the lender is looking for
Every lender has its own criteria by which it measures applicants, and there’s no way of knowing exactly what these are. Unfortunately, this means that if you’re turned down, it might be for none of the reasons above but just because you aren’t what they’re looking for. However, this doesn’t mean every lender will reject you.
Too many applications
Making too many applications for credit can stand against you as it may make you appear desperate to borrow. It’s frustrating when an application is turned down, but it’s best to take your time and only apply to the lenders who offer the deals most suitable to you, and that you think you’ve got the best chance of being accepted by.
Of course, it’s difficult to predict accurately which lender will approve your application, but you can use an eligibility calculator like this one to give yourself a fair idea. Using this calculator will not leave a mark on your credit history like a formal credit search will.
We hope this guide has made the reasons your credit application can be turned down a little easier to get your head round!