Getting turned down for a loan can be disheartening, especially if you don’t know why you were rejected.
You may feel confused and wonder what it was that got you turned down, not to mention worrying where you’re going to get the money from now.
But you don’t have to stay confused and just make another loan application, crossing your fingers that you’ll be accepted for this one instead. We’ll take you through some of the reasons why you could have been rejected for credit and show you how you could get the lenders to say “yes” to you in the future.
There are three main reasons why you might have been rejected for credit.
1. You don’t meet the lender’s own criteria
Each lender has its own lending criteria. Perhaps they have a minimum salary level of £25,000 that they will accept, for example. If you don’t meet their criteria, they won’t accept you – but that doesn’t mean that another lender won’t. Often lenders will spell out what they require on their website.
Lenders will also use details such as your current account and ID to verify that you are who you say you are. If these don’t stack up they won’t accept you.
2. The lender doesn’t think you can afford the loan
All lenders must check whether they think you can afford the loan – it would be irresponsible not to, after all. They will usually look at the income and outgoings on your bank statement to make this decision. You can do this yourself – add up all your regular incomes and subtract from it all your regular outgoings. Do you have enough left to cover the loan repayments? If you don’t then you have a few options; apply for a smaller loan, or change your spending habits, then wait a couple of months for your new lower spending to be clear on your bank statement before you apply again.
3. Your credit history isn’t good enough
As well as checking your ID, testing you against their own criteria and checking you can afford the loan, lenders will also check your credit history. Your credit history goes back six years and just shows all the credit you’ve had over that time and whether you made your payments in full and on time (or not). This is information held on you about how you’ve handled borrowing in the past by one of the three main credit reference agencies: Experian, Equifax or Callcredit.
You can view your credit history to see what the lenders can see. With Experian and Equifax, you can sign up for 30 day free trials on their websites to look at your credit history, but make sure to cancel before the end of this time to avoid being charged the full subscription fee. However, with Callcredit, your credit history is always free – you can just sign up through Noddle.
Alternatively, for £2 you can get a one-off £2 statutory credit report from any of the credit reference agencies.
Once you’ve got access to your credit report, you should look for anything that could have caused your loan rejection. This could include any defaults or late payments, as well as any CCJs or insolvencies. To find out what you should be looking for in your credit report, check out our post on the subject.
If your credit score isn’t perfect, that doesn’t mean that you won’t be able to get a loan. Lenders all vary and there are lenders that specialise in lending to people who have had credit problems in the past. For example, you could consider a credit builder credit card, like the Ocean credit card for bad credit (representative APR 39.9%). By borrowing on this and making sure that you pay it back on time, you could show lenders in the future that you’re able to manage credit responsibly. As with any credit agreement, you should avoid borrowing more money than you could afford to pay back as any failure to repay could cause serious problems for your credit history for up to six years and you may end up paying extra interest and charges too.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.