What to do if you fail a credit check
Being turned down for credit can stop you getting a mortgage, loan, credit card and even a bank account or mobile phone contract. Our guide looks at why it might happen and what you can do about it
How can you fail a credit check?
There can be various reasons you can fail a credit check and it isn’t always immediately obvious or because you have a low credit score. Common factors leading to a credit check failure include:
Defaults on loans or other borrowing, where you don’t have the finances to repay the money owed and the company writes off the debt.
County Court Judgments (CCJs), where a court rules you owe money to a person or organisation.
High levels of outstanding debt relative to income, where the potential lender may feel it is too much of a risk to allow you to borrow more.
Frequent applications for credit within a short period, which suggests that you might be desperate for additional cash and serves as a warning sign for prospective lenders.
Bankruptcy, where you either declare yourself bankrupt, creditors successfully apply to make you bankrupt or an insolvency practitioner makes you bankrupt because you’ve broken the terms of an individual voluntary arrangement (IVA).
A lack of a credit history, perhaps you haven’t previously needed to borrow, or you’ve only just turned 18 or have recently been made a UK citizen with little financial track record.
Identity fraud. If your details have been stolen and especially if you don’t realise straightaway your account could be misused, with credit applications from identity thieves common.
You don’t meet the lender’s requirements. It’s not the credit agency (such as TransUnion, Equifax or Experian) that decides whether to approve your application. While lenders use these ratings, each has a different set of requirements you must fulfil, such as having a minimum or even maximum level of income.
A mistake on your application form. You may have filled in your address incorrectly, for example, meaning that the credit provider can’t validate where you live.
Financial associations. Being linked to someone with a poor credit history through a joint financial product can affect your creditworthiness, as you may be seen as sharing financial responsibilities with a higher-risk individual.
Where might you fail a credit check?
The requirement to be approved for a credit happens more frequently than many of us consider. Here are some examples where you might fall foul of a credit check.
Renting a property. Landlords often conduct credit checks on prospective tenants to assess their financial responsibility. If your credit history reflects issues like late payments or defaults, it could lead to a rental application rejection.
Applying for a mortgage. Mortgage lenders scrutinise your credit history to determine your ability to manage a home loan. A poor credit history, including late payments or significant debts, may result in a mortgage application being declined or receiving less favourable terms.
Getting a personal loan. When applying for a personal loan, lenders assess your creditworthiness to determine the risk associated with lending to you. A history of defaults, bankruptcies, or high levels of debt might lead to loan rejection.
Credit card applications. Banks and credit card issuers review your credit report when you apply for a credit card. A less-than-ideal credit history could result in the denial of your credit card application. If you are approved it may be with higher interest rates and lower credit limits.
Car financing. When applying for car loans or car finance, your credit history plays a key role. A poor credit score may lead to higher interest rates, larger down payment requirements, or even being turned down for the finance.
Mobile phone contracts. Mobile phone providers may conduct credit checks when customers apply for contracts. A poor credit history may lead to the requirement of a prepaid plan instead.
Opening a bank account with an overdraft. Banks run credit checks when customers apply for overdrafts on their bank accounts. A low credit score might result in the denial of overdraft privileges.
Job applications. In certain industries, employers may conduct credit checks as part of the hiring process. A poor credit history could influence employment decisions if the company believes it may affect your ability to conduct the role.
What should I do if I’ve failed a credit check?
If you’ve failed a credit check, there are a number of steps you can take. These include:
Check your credit report. Review your credit report for errors and dispute any inaccuracies to ensure the information is correct.
Apply for less ambitious financial products. Consider applying for financial products with lower credit limits or less stringent approval criteria because this could increase your likelihood of approval.
Explore alternative options. Consider alternative lenders or credit products from specialist providers designed for individuals with lower credit scores or bad credit
Use a ‘soft search’ through a comparison site. MoneySuperMarket’s eligibility checker undertakes a ‘soft search’ to show you your chances of being accepted before you apply, helping reduce the chances of being rejected.
Evaluate your financial situation. Assess outstanding debts and address any late payments, taking steps to improve your overall creditworthiness.
Contact the lender. Reach out to the lender for specific reasons behind the rejection. They are under no obligation to respond, but if they do it may help you gain insight to rectify any issues and improve future applications.
Establish a stable credit history. Making timely payments on existing accounts isn’t a quick fix but can work towards building a positive credit history. Our guide suggests more ways to improve your credit score.
Can you fail a credit check with good or excellent credit?
Yes, you can fail a credit check with a good or excellent credit score.
Although this might seem harsh, the decision to approve your credit application depends on the credit provider and they have their own criteria and requirements.
For example, certain credit card providers might only be interested in customers who pass an income threshold, even if they have an excellent credit score.
Can you fail a soft credit check?
In theory, you can fail a soft credit check, but it won’t leave a negative mark on your credit score.
In fact, the reason that companies perform soft credit checks is to help potential customers understand their chances of being accepted for different financial products before they make a hard application.
This is a way of protecting your credit score by helping you avoid making applications where you’ll be rejected.
Does failing a credit check affect your credit rating?
Each credit check leaves a mark on your credit report, so a credit check can affect your credit rating whether you pass or fail.
While a single inquiry may have a minor and temporary effect, repeated applications over a short period can signal financial instability and lead to a lower credit score.
This is why it’s important to manage your credit applications carefully to maintain a positive credit rating.
How long does refused credit stay on your credit file?
Your credit file records credit applications, but doesn’t distinguish between whether they are accepted or refused.
Any credit application can stay on your credit file for around two years in the UK.
While it could have a negative impact on your credit score, it’s worth acknowledging that you can’t avoid credit checks if you want to take out a mortgage, loan or credit card, for example.
If you are refused credit, the crucial factor is to address the reasons you’ve been turned down and work on improving your creditworthiness so it doesn’t happen again.
Can you pass a credit check with a CCJ?
You may be able to pass a credit check with a County Court Judgement (CCJ), but it will depend on the financial product you are applying for and the view of the credit provider.
If you are applying for a loan, for example, you might find that you are offered a lower amount at a higher interest rate to cover the risk that you might default on repayments.
How do you fail a credit check for renting?
While you might not be borrowing any money when you apply to rent a property, landlords and property management companies still conduct credit checks for several reasons.
These include assessing the financial risk associated with renting to you including your financial stability and whether you’ve kept up with rent repayments in the past.
Often landlords are required to verify the identity and immigration status of tenants. Checking an applicant's credit history is one way to confirm their identity.
If you have a chequered financial history or don’t appear to have the income required to sustain the rental payments, then you could fail the credit check.
Why would I fail a credit check for a phone?
Credit checks help mobile phone providers assess the financial risk associated with providing their service.
Phone contracts often involve a commitment to pay a fixed monthly fee for a specified period and companies want assurance that customers have the financial capacity to fulfil this commitment throughout the contract term.
Credit checks can also help verify the identity of the person applying for the phone contract. This is a preventive measure against fraudulent applications and ensures that the person entering into the contract is creditworthy.
Why can’t I get a loan with good credit?
A key reason for not being able to get a loan when you have good credit is that you are looking to borrow more money than the provider believes you can afford.
Even if you have an excellent credit rating, the provider will want to be assured that you have the income available to meet the loan repayments.
If they feel you are taking on too much debt they may turn down your application.