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Whenever you apply for credit, lenders make numerous checks behind the scenes. Find out why you may be been approved or declined and improve your chances.

When applying for a loan, credit card, mortgage or overdraft you may be required to complete a credit application to check your suitability. Although your credit record may be spotless it doesn’t guarantee your acceptance as lenders also assess you based on their own specific criteria.

Some key points:

  • Numerous checks are performed by lenders before they decide to either approve or decline your credit application
  • Knowing each stage may help you to ensure you can give the lender the relevant information
  • Checking your credit report can help to highlight areas that need correcting, and provide ideas on how to improve your credit rating visit
  • Undertaking a soft search for a financial product can help you avoid failed applications

Lenders must state their minimum requirements and exclusions before you begin the application process. Being aware of lender checks and processes can improve your chances of being accepted in the future.

You may also want to consider using a soft search tool before applying for a financial product. This tool performs a ‘soft search’ using your credit report which will not be visible to lenders, giving you a good idea of the products you will qualify for without affecting your credit file.

The credit application in 4 easy steps

  1. Check your identity - In order to prevent fraud, lenders will have to verify you are who you say and that you meet the minimum requirements e.g. Minimum income, and residential status. They will verify your identity electronically by checking the details you provide on your application against a credit file which contains information from the electoral register. For this reason, it is important that you put your current address on the electoral register. If for you have recently moved house and the lender is unable to verify your identity this way they will request extra documentation such as a recent utility bill.
  2. Customer profile capture - A record of this information is then created so they can carry out further checks.
  3. Internal matching - The information you have supplied on your application is then checked against the details the lender already has on file from your past dealings with them or an affiliate.
  4. Credit check -  This is the final step in the process as you will have had to pass the previous steps before it's carried out. In order to complete this stage, the lender will need your explicit consent to view your credit file, which is recorded by one of the three credit reference bureaus - Equifax, Experian and Callcredit. This information is used by various third parties.

Credit decision

If your application fails you will either be declined or referred. If you are referred the lender will ask for more information to verify your identity or income. In the instance that you are declined the lender must give a reason why.

You may be tempted to make more applications following a declined application; however, any failed applications will be visible on your credit file. As each lender has access to this during the application process, the more declined applications noted on your file the less likely you are to be accepted during further credit applications.

If you are rejected it may be wise to check your report for anything that may be a problem.

Credit check

Lenders do not base their decision on your numeric credit score, this score gives you as a customer an idea of how strong your credit report is. Regardless of your score, you may still be rejected if you do not match the profile the lender is looking for.

Not all lenders carry out identical credit checks either, some may look for any missed payment within the past 6 months whereas others may look as far as 2 years and some disregard these entirely. Generally, for better products i.e. lower interest rates, the criteria will be more specific.

When to check your credit report

Being aware of what is on your credit file is important and a simple way of increasing your chances of having a credit application accepted. Your credit file factors in a lender’s consideration of your credit worthiness, therefore being aware of your scan can be the difference in being accepted or declined.

Keeping a check on your credit score allows you to be pro-active and correct any mistakes and track changes. This can also be a good fraud indicator.