What can I do if I’m refused credit?

Key reasons why you may have been turned down for credit

Experian – Consumer Credit Reference Agency

by Experian | Consumer Credit Reference Agency

Helping you stay in control of your finances and protecting your identity

It’s bad enough to have your plans scuppered when you’ve been refused credit. But not understanding why you’ve been turned down is even more frustrating. Especially if you think you’ve got a pretty good credit rating.

Who decides?

The company you’ve applied to for credit makes the decision to either approve or reject your application. Credit reference agencies like Experian may provide them with your credit history but they don’t have any sway when it comes to whether they will lend to you.

You can ask the company in question to explain why your application has been turned down and they should be able to give you the main reason for it. This could help you work out what you can do to improve your credit score, so it’s worth finding out.

When you apply for credit, the lender will want to assess how likely you are to repay them. They look at your credit report, application form and information they may hold on you (if you’re an existing or previous customer). All this data is used to calculate your credit score and each company has their own way of working this out, so your score will probably vary from lender to lender. Companies will also expect you to meet their criteria before they will lend to you, so you might find your application rejected, even though you have a good score.

If I’m refused credit, will it affect my credit rating?

No, this won’t hurt your credit score. A company’s decision is not recorded on your report, so only you and the lender will know you’ve been rejected. What will damage your score, however, is making multiple applications over a short period of time. It’s far better for your credit health to space out your applications and try to apply for credit you’re more likely to get.

Reasons you may have been turned down for credit

Common reasons include:

  • Not enough credit history – if you haven’t built a good track record of using credit there might not be enough data available for lenders to approve you.
  • Poor credit history – missed or late payments, defaults or county court judgments in your credit history.
  • They were unable to confirm your ID and address – maybe because you are not registered on the electoral roll, or haven’t updated a change in name or address details.
  • Too many applications in a short timeframe – this scattergun approach to applying for credit will make companies suspect you have financial difficulties.
  • An Individual Voluntary Agreement or Debt Management Plan – either of these suggests you won’t have the funds to afford to add to your debt.
  • You’ve made a mistake on your application form – something as simple as the way you fill out your address information could be an issue, so always double check your form before you hit send.
  • A negative financial association – you’ve at some point shared an account with someone who now has a bad credit history. To cut ties you need to inform the credit reference agencies to remove the person from your report.
  • You don’t fit the bill – some companies have a specific target customer and will only accept those with high or low incomes, for example.

Remember, by checking your credit report you can identify whether some of the reasons listed above apply to you.

Before making financial decisions always do research, or talk to a financial adviser. Views are those of our mentors and customers and do not constitute financial advice.