Let’s face it, rejection is never nice. Being turned down for credit can be highly frustrating and disheartening, but don’t panic, as there are things you can do to help increase your chances of approval the next time you apply.
What not to do when you’ve been refused credit
The worst thing you can do when you’re rejected for credit is to instantly start applying elsewhere.
A lender will search your credit report every time you make an application for credit, be it a loan, credit card, mortgage or even a mobile phone contract. These searches leave a mark known as a hard inquiry. Other lenders will be able to see this when they check your file and too many hard inquiries in a short period of time creates the impression that you are desperate for credit and may be unlikely to keep up with repayments. Multiple hard inquiries can also negatively impact your credit score.
Why have I been refused credit?
One of the first things you should do is contact the lender in question to find out why they rejected you so you can take steps to rectify what caused the issue. Lenders are required to provide a reason for refusal if it’s as a result of checking your credit report and details of which of the three credit reference agencies it used for the credit search. They may also be able to provide guidance on what to do.
Reasons people are usually rejected for credit
- You don’t fit the lenders profile – Every lender will have their own profile of the ideal customer. Whilst one lender may view your application positively, another may not.
- Too many credit applications – As mentioned above, too many credit applications in a short space of time can be seen unfavourably by lenders.
- Bad credit history – A bad history of borrowing will make lenders reluctant to lend to you in fear that they may not receive the money back that you borrowed.
- Mistake on your application form – You may have misspelled your address or personal details or forgot to tick the right box.
- You’ve never borrowed before – Lenders want to see that you have a good history of managing debt to ensure you’re likely to repay what you borrow. If you’ve never borrowed or had a line of credit before, then you’ll be unlikely to have a credit report or credit history to prove this.
- Errors on your credit report – There could be mistakes or missing information on your credit report that could be holding you back.
- Not registered on the electoral roll – Electoral roll information provides lenders proof that you are who you say you are and helps to avoid identity fraud.
- Financial associations – Anyone you’re financially associated with through a joint account or other means creates a link between yours and their credit report. If they have a poor credit history then it could affect your ability to get credit.
What to do after you’ve been rejected for credit
Check your credit report
Having considered the reasons for being refused credit, you’ll probably be able to see that a lot of it is tied into your credit report. Therefore, you should check your Noddle credit report after you’ve been rejected and before you apply for more credit so you can see what lenders will see.
More than 1 in 3 people who have checked their credit report have found errors, according to research from Amigo Loans. Scrutinise every part of your report to ensure everything is up to date and accurate. Doing so will also mean you can spot any potential fraud or identity theft early, which might have been the reason you were rejected.
You can add a notice of correction to explain to the background and circumstances to something on your credit report that may have a negative impact. For example if you were a victim of fraud or are still financially connected to an ex-partner who has debt problems.
Get on the electoral roll
If you’re not already on the electoral roll or haven’t registered a new address, then it’s one of the easiest and quickest things you can do to improve your chances of being accepted next time. Electoral roll information provides proof of your identity to lenders.
Review your financial associations
You can check anyone that you’re financially linked to on your credit report. If there are old financial links, such as an ex or former flatmate, then you’ll want to make sure these are removed as long as there are no outstanding financial commitments.
Build a good credit history
Whether you have no credit history at all or a less than pristine history of borrowing credit, then you should start by building a good one. This means borrowing only what you can afford to pay back and repaying the full amount on time. To make it easier, it’s a good idea to start small, for example with a credit card that has a low credit limit. Credit builder cards are good because they’re designed to help people build their credit. However, beware, as they can come with high interest rates so it’s important to not go over your limit. Click here to find out more on getting a better credit score.
Do your research and choose the right lender
Before you set off to make another application, ensure you’re applying to a lender that is more likely to accept you and that it is the right credit for you. Do some research into the requirements for credit for each lender to give you better idea of your chances of being accepted. An eligibility tool helps you do just that without leaving a hard inquiry on your credit report.
Don’t be disheartened if you’ve been refused credit. Take the necessary steps to improve your chances of being accepted the next time you apply. You can use an eligibility checker, like ours, which shows you credit cards and loans that you are most likely to be accepted for based on your credit score without leaving a hard inquiry on your credit report.