What happens if you are refused credit?
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
26th July 2021
4 minute read
Have you been refused for credit? If you have had a rejection after making a credit card, loan or mortgage application, it can be disheartening say the least.
Despite being a disappointment, a credit refusal will do you the favour of highlighting why you have been rejected in the first place, and therefore allow you to rectify any issues you have with your credit file. This can be especially valuable for the future if you’re thinking of taking out a mortgage and need to guarantee you will be accepted.
Instead of feeling low about your rejection, use it to improve your credit score for the future and put yourself on a more enlightened path. The Guru has faced rejection many times, but now he simply dusts off his robes and gets back on his metaphorical unicorn before riding off towards a hazy purple sunset. It normally does the trick.
What should I do next?
Do not apply for anything else. Multiple rejections can seriously harm your credit score and will just make things worse. If you want to check your eligibility, try our moneymatcher tool for credit cards or loans as it’s free and won’t affect your credit score.
Stay calm. No one likes receiving a rejection but that doesn’t mean that you will never be accepted for credit. In fact, there are plenty of financial products that are designed for those with bad credit to improve their credit rating (but we’ll get onto credit builder cards later).
The fact you have been rejected simply means you do not meet the criteria set by the card provider or lender. There is often a clear reason behind a rejection, whether it’s something about your personal circumstances, financial history or your credit score.
Why was I refused credit?
You might already know the reason for being refused credit, especially if you have had a troubled financial history. We’ve listed just some of the possible reasons for you being refused credit below:
- Multiple rejections already – if you have been applying for many financial products but have been rejected for all of them in a short space of time, this can significantly impact your credit score. You will also be seen as very untrustworthy by lenders.
- Thin credit file – if you have never taken out any credit cards, loans or finance of any kind, you’re considered to have a thin credit file. Repaying credit is seen as strong evidence you can be trusted by lenders, so without this evidence you might be rejected.
- Missed or late repayments – if you already have a credit card, loan or mortgage, and have missed a payment in the past, it might have affected your credit score
- CCJ’s – a CCJ or County Court Judgement can be applied to your file by creditors if you refuse to pay an outstanding debt. This will negatively impact your credit score for up to 6 years
- Bankruptucy – if you have previously been unable to repay debt and have declared bankruptcy this can affect your credit score for up to 7 years
If your application for a loan or credit card is refused, the credit provider should inform you whether you were rejected because of your credit score. If the reason for your rejected application is due to you credit rating, you should be told which credit reference agency they used. You can ask for an explanation as to why your application was rejected but they aren’t obliged to offer a detailed reply.
Check your credit report thoroughly
If you notice a mistake on your credit report, then you should immediately contact the credit reference agency and request for it to be corrected. You will likely have been assessed by one of the three main agencies in the UK:
You should include an explanation and evidence for why the information is incorrect. The agency then has a 28-day period in which to respond, with the relevant information being marked as ‘disputed’ whilst it is investigated.
What are my options?
- Check your credit report – if you haven’t done so already, check your credit report and find out what might be bringing your credit score down.
- Take steps to improve your credit score – use suggestions from your credit report to guide you on how to make improvements. They might include getting on the electoral roll and disassociating yourself from people you used to have a joint account with.
- Get financial advice – if you are struggling to keep up with repayments on other cards or loans and have just received a rejection, it can be incredibly useful to speak to a financial advisor. Find out more from Citizens Advice here.
- Use moneymatcher to narrow down your options – using a free eligibility checker like moneymatcher can help avoid rejections entirely by finding the right credit card or loan for you. It will also not affect your credit score.
Make another application – only if you meet the criteria
If you have looked through your credit report, taken steps to improve your credit score and are ready to apply for another financial product, you need to be certain you will be accepted. Whilst it can be difficult to predict, as long as you are applying for products that match your current circumstances you should be fine. The following two products could be the way to go:
- Apply for a credit builder card – if you would still like to apply for a credit card and improve your credit score at the same time, a credit builder card is a good option.
- Apply for a bad credit loan – another option could be applying for a bad credit loan. Be advised: while low credit ratings are accepted, the APR is much higher than regular loans so will be expensive to pay back. If you are already struggling to pay off current debts, this might not be a very good option for you.
Remember that an eligibility tool such as moneymatcher is a safe way to narrow down your options, especially when you have previously been refused. It might have been possible that the original loan or credit card you were applying for required a very high credit score, but there are still a wide range of options available to you.