What to do if your loan or credit application is rejected

• Wait between making applications for credit
• Understand Why You Were Rejected
• Consider Loans For Those With A Low Credit Score
• When You Should Make Another Application?
• Conclusion

Wait between making applications for credit

The majority of applications you make for credit or a loan will appear on your credit file and could stay there for two years (exact periods will vary). Therefore, if you make another application for credit after being rejected then the next lender you apply with could see this failed application, which could lead to another rejection. A series of rejections may lead lenders to suspect something is wrong and that you are potentially desperate for credit or currently in a bad financial situation which can act as a deterrent. So, before you make another credit application, it is essential to understand why your application was rejected in the first place.

Understand Why You Were Rejected

There are multiple reasons why your application could have been rejected and you should try to understand these reasons or at the very least be aware of the causes of rejection so you can try to rectify the issue(s). Once the issues themselves have been addressed, this could get your credit score back on track, which could, in turn, facilitate successful applications for credit in the future. The following are reasons why your application may have been rejected:

1. Your address or your identity could not be confirmed by the lender. This can occur if you are not registered on the electoral roll. This can also happen if you changed your name or moved your address without informing your bank, for example.

TIP: Being on the electoral roll can help lenders identify you and validate your address. If you are not on the if you aren’t on the electoral roll you can register for it.

2. You have an insufficient credit history. If you have never had any form of credit before then, this can deter lenders as there is insufficient data regarding your eligibility or suitability as a candidate.

3. If you have received credit in the past but have made any late payments, or missed a payment completely (sometimes referred to as defaulted), or a CCJ (County Court Judgement) on your credit file, then you could be viewed as a risk to a lender.

4. If you are currently in a debt management plan or have something similar in place, lenders may view this as a sign that you struggle to make repayments.

5. You have completed multiple applications for credit in a short space of time. This could indicate to lenders that you are experiencing or expecting financial difficulty and are therefore a risk.

6. Mistakes on credit files are surprisingly common. If your address is noted incorrectly, for example, then this could be flagged as a mistake and might be dragging your score down unnecessarily – contact the provider of your credit report if you do feel there is an error on your credit file.

Once you know the reason for your application rejection, you should try address and fix the issue(s). In the case of a default or a CCJ, it is crucial to be aware that improving your score will take time, and you might have to take relatively large steps towards this improvement and be patient regarding time scales.

You could also sign up for a full copy of your credit report. This will give you a complete picture. If you wanted to go one step further you could get copies of your score from the main three providers of credit scores, so you know exactly what the issue(s) are. The primary three providers being:

• Transunion (formerly CallCredit)
• Equifax
• Experian

Lastly, you are well within your rights to ask the lender who rejected your application why you were not accepted; you can do this by contacting them via telephone, email, post or live chat. They are not obliged to tell you the exact reasons. However, their response may help you identify and correct the issue. For example a lender may inform you that: “you did not pass our credit check” or “you did not have a high enough credit score”. On the other hand, they may also be more forthcoming, and the information they give you may help you quickly pinpoint the issue.

Consider Cards For Those With A Low Credit Score

If your application was rejected because your credit score was too low, you could consider applying for a credit builder card designed specifically for individuals with a low credit score. This is not an avenue that should be undertaken lightly. Often, the terms and conditions of such loan/credit products are not favourable, inclusive of high APR and associated fees.

When Should you Make Another Application?

We would suggest that you wait at least one month before you make another (or at the very least a similar) application for credit. This will give you time to address the issues on your credit report. It could also give your credit score time to recover and to improve, though if your credit score is especially low, and you have taken gradual steps towards improving the score itself (securing a credit builder credit card, for example). It might take some time for your score to increase dramatically and to reflect a positive change in the management of your finances. You can monitor your credit score as well as see if there are errors in your credit history or details by signing up to a credit report provider, some offer a free trial period and others are free to use.

To Conclude

You can take steps to improve your credit score and increase the chances of your credit application being accepted. Firstly, you could (before you make another application with a different lender or for a different loan product) work out the root cause of the rejection of your application. Then take proactive steps towards resolving the issue.

For more information on improving your credit score, check out our ultimate guide on how to improve your credit score in 10 simple steps.