Refused credit

What to do if you're refused credit

Published Thursday 15 February 2018
 

If you've been turned down for credit, there are steps you can take to find out why and help improve your score.

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Why was I refused credit?

Being refused credit can be inconvenient, but it can help to know why this happens when it does. Your credit application may have been rejected due to:

  • A poor credit rating: if you regularly miss repayments or go over your credit limit, this can have an adverse effect on your credit rating. The lower your credit rating is, the more likely you are to be refused credit when you apply – learn more with our guide to what makes a good credit score
  • A limited credit history: if you haven’t previously taken out credit, or only rarely do so, your credit history will be thin. This means lenders won’t have enough information to judge whether you’d be a good applicant, so they’ll be more likely to reject your application
  • Your employment history: lenders also consider your employment status and history when making their decision, and if you’ve changed jobs frequently or aren’t earning enough, your lender may see you as a higher risk applicant
  • Bankruptcies and CCJs: if you have any bankruptcies or County Court Judgements (CCJs) on your credit file within the last seven years, these can be big indicators to lenders that you’ve had financial difficulties. As a result, they could see you as a risky applicant, so you’re likely to be refused if you apply
  • Your lenders’ requirements: when you apply for credit, the lender you choose will use a credit reference agency to assess your risk. However, it isn’t the agency that makes the decision, it’s the lender – and they make it based on their own criteria. As a result you may be refused credit by one lender but accepted by another that has different requirements
  • Mistakes on your application: even small mistakes, such as giving the wrong name or address on an application, could be enough for the lender to refuse you credit. This is why it’s so important to thoroughly check your application over before submitting it
  • Identity theft: if your credit report looks to be in good stead and your application was in order, you may want to consider the possibility of identity fraud or theft. If you think this may be the case, you should contact your bank or lender as well as Action Fraud, the UK’s National Fraud and Cyber Crime Reporting Centre

Why was I refused credit if my credit score was good?

While lenders do generally take your whole credit score into account, they may be more interested in certain aspects to it.

For example, it stands to reason that a lender will be most interested in your history of repaying loans and credit. Therefore if your credit score is high as a result of consistently paying bills and rent but you’ve missed a few loan or credit card repayments, this could be enough to put lenders off.

Remember your lender will have their own acceptance criteria, which can be different to credit reference agencies and other lenders. As a result your application may be rejected by one lender, but you might be successful applying elsewhere.

Applying again

If you’ve been refused credit, you may be considering making another application straight away. However you should hold off for a while and try to resolve any issues that might’ve caused the rejection.

This is because frequent applications can weaken your credit report as each application, whether successful or not, represents a debt that you’ve tried to take on. Debt is a risk factor that could affect your ability to make repayments, and the higher the risk the less likely you are to be accepted.

What won’t impact your credit score is a refused application, as your credit report doesn’t show whether your application is accepted or not – just the number of applications you’ve made.

What should I do if I’m refused credit?

If you’re refused credit, there are steps you can take to understand why:

  • Ask your lender: if your application for credit is refused, you can ask the lender why they turned you down and if it was due to your credit report. They should tell you if your report was a factor as well as the agency they used to retrieve it, but they may not give you details as to why you were refused credit
  • Correct mistakes on your credit report: the next step would be to get a copy of your report from the credit agency used by your lender. When you do, check if there are any errors on the report and let the agency know straight away. Explain why you think there are mistakes, with evidence if possible, and try to address any issues your lender has pointed out
  • Improve your credit score: there are certain actions you can take to strengthen your credit report and make it more likely you’ll be accepted next time. For more information read our guide to rebuilding your credit score

Rebuild your credit with a credit builder credit card

One way to strengthen your credit report and demonstrate your ability to borrow responsibly is to apply for a credit builder credit card.

While you should try to improve your report by keeping up with existing payments and registering for the electoral roll (if you haven’t already), once you’ve let enough time pass you can try making a new application.

Credit builder credit cards are designed for people with poor or no credit history who don’t qualify for standard credit cards, and as such they generally have higher interest rates. However if you keep up with your monthly payments, even just meeting the minimum amount, you shouldn’t have to pay any interest.

As you do this over time, you’ll build trust between you and your lender and slowly restore your credit rating – making it more likely you’ll be accepted for credit in the future.

Compare credit cards

If you’re looking for a new credit card, you’ll find better deals by comparing on MoneySuperMarket using our eligibility checker. All you need to do is tell us a little about yourself and your finances, including your income, employment status, and what you want to use the new credit card for.

Then we can show you a list of credit cards suited to your needs, and you’ll be able to sort them by their interest rates on balance transfers and purchases as well as how likely you are to be accepted if you apply. This means you can avoid making too many applications and reduce the risk of being refused for credit.

Once you’ve found the credit card you want, just click through to the provider to finalise your application. If it’s accepted, your lender will set your credit limit and interest rate, then you’ll receive your card in the post – all you’ll need to do is activate it and it’ll be ready to use.

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