If you need to borrow money then getting the notification that your application has been declined can be incredibly frustrating. Whether you were hoping to obtain a mortgage, were trying to get a new credit card or even a mobile phone on contract, if you’re not eligible – but you’re not sure why – then you may not know how to remedy the situation. And you need to remedy it otherwise you’re only option will be a so-called bad credit loan. So, what can you do next?
Find out why your application was declined
There could be many different reasons for not being accepted for credit. You may already have too much debt or be struggling with a bad credit score. However, it may be a much less obvious reason, such as not being on the electoral roll. You may also find that you’ve been rejected for credit because of a mistake in your credit history. Or it could be the result of a fraud that you have no knowledge of. The first, and most important, step is to find out why your application for credit was declined. You can do this by calling the lender or by putting the question in writing.
Do you have a right to know the reasons?
Yes. Mortgage lenders are required by the Banking Code to give you an explanation for the denial of your application. Loan & credit card providers are also under and obligation to inform you of the primary reason for the application being declined. The same applies to any type of credit, whether you’re applying for a mobile phone contract or a credit card. Most credit providers will have guidelines on their website that set out how you can find out why your application was rejected.
The information in your credit report
If your application for credit has been declined this is often because of the information in your credit report. So, as well as asking the lender for their reasons it’s also a good idea to look at your credit report so you can see the information that they based their decision on. You can check your credit report with one of three main credit reference agencies in the UK – Experian, Equifax or Callcredit. Most offer the first month of access for free with a small charge after that if you don’t cancel. Go through your credit report and look out for any anomalies. For example, you may find that your credit report is still linked to an ex-partner that you used to share a joint account with and it may be this that is dragging the credit score down. If you see any signs of fraud in your credit report – e.g. new credit cards or loans that you don’t recognise – then you should contact your bank straight away.
If your application has been rejected as part of an automatic credit approvals process and you don’t believe this took into account all of your circumstances then you can appeal the decision. The GDPR, which came into force in May of this year, brought with it a new obligation on banks to review a credit application rejection that was not made by a human. So, if your application was rejected and it was processed via software you can insist that it be reviewed by a real person. In many cases, a credit situation may be more complex than a computer is able to appreciate and so review by the human eye could be essential to ensuring that a fair and accurate decision has been reached.
Appealing lending decisions
If your application was rejected other than on an automated basis then you still have a right of appeal. You will need to contact the lender who made the decision – often within 30 days to ensure that the original information you supplied is not out of date. If you aren’t given any reason for a declined credit application then you can make a complaint about the way that your request has been dealt with by the lender to the lender’s complaints department.
What else can you do?
It depends on the reason for the application rejection. However, there are a number of steps you can take to ensure that your application is more successful next time.
- Stop making credit applications – the more applications you make, the more this will negatively impact on your credit score.
- Work on whatever is missing from your credit report – that may be correcting errors, paying back some debt or asking a lender to remove a black mark e.g. for a missed payment.
- Look at a different type of lender – there are many more options than just mainstream lenders. For example you may have more luck with guarantor loans or homeowner loans.
- Review your spending – especially if the rejection was on the basis of your balance of income and expenditure (i.e. affordability), it might be time to review what you spend vs. what you earn.
- Existing debts – if you already have various lines of credit then borrowing yet more may not be feasible if it impact the total affordability of all debts.
- What to do if credit reference agencies hold incorrect data about you
- 10 things on your credit file that you should ensure are correct
- The difference between your credit file and your credit score