Declined for credit, what to do

Posted by Kevin Pearce in Declined Credit on 22 November 2016 - Kevin is a Senior Credit Analyst at checkmyfile

Being declined for credit sucks. Even if the applicant is an otherwise sensible human being, it’s not always easy to accept that a person or computer has decided that you are not worthy of their finance. Even if you do manage to remain stoic in these situations, sometimes that money was needed for financing your grand plans or for debt consolidation, which can be disappointing and/or stressful.

Fortunately, credit applications are largely based on objective, rather than subjective, data. This means that there is often a way for you to work out why they decided to decline your application and potentially make positive steps toward improving your financial situation.

Credit lending decisions will be made after considering your credit file and assessing the perceived risk of lending to you. Essentially, if you make all payments on time and have sufficient levels of proof that this is consistent across all accounts and for significant periods of time, this part should be fine. It is also often essential that you show on the Electoral Roll, preferably at your current address.

They will also look at the amount you have asked to borrow on top of how much debt you already have and the amount you pay each month to cover these, then compare this to your income.

Then there are factors such as length of employment, type of employment, how near to your credit limits you are, how much unused available credit you already have…the list can be quite extensive and you will not always be able to work out the issues (you could be caught up in their fraud checks, for example). Either way, getting any sensible or helpful answers out of some lenders can be extremely frustrating. Best try to work it out ourselves then.

Your credit file should be the first port of call when looking into why you were declined. Many people are surprised when they first check their credit files, as it can be a bit of a reality check when it comes to level of debt and how well those accounts have been maintained. Other issues could arise that you were unaware of, such as not showing on the Electoral Roll when you know you are definitely registered, or a CCJ appearing that you had no idea was ever lodged against you.

The main thing to realise is that you have the right to dispute anything on your credit file, if you wish. Bear in mind that if you know the information is correct but don’t like that it shows on your file, you can certainly try your luck, but don’t be too surprised when your dispute is rejected as the information is correct.

If you have genuine cause to raise a dispute, it is always best to first contact the lender or service provider directly, as they control and own the data. The credit reference agencies simply report the information that is supplied to them and have no powers to force amendments if the provider of the data considers it accurate. Hopefully, following investigation, the company agrees that an error has been made and will make the relevant amendments within 4-6 weeks.

If the information is correct:

Arrears remain for 6 years from the date the account is closed

Defaulted accounts remain for 6 years after the account first defaulted

All court information remains for 6 years after it was first lodged against you

If you are not showing on the Electoral Roll, simply contact your local council to register or, if you are already registered, ask them to send an update to the credit reference agencies. It can sometimes take up to 3 months to be reflected on your credit file.

Alongside the credit file is the information that you supply to the lender at the point of application, which typically consists of the affordability information outlined earlier.

Sometimes the numbers just aren’t in your favour and the amount of outgoings is looking awfully similar to, or higher, than the amount coming in. The annoying thing is that this is the reason you would apply for a debt consolidation loan, for example, which is to ease the strain by obtaining better interest rates or more favourable terms.

In these circumstances it may be best to hang fire on that application and focus on what you can do to ease the burden yourself. Cut costs wherever you can and go through all of your statements to see where your money is really going. You could probably make a good saving without trying too hard and if you’re really strict you could start seeing the debt go down and then you may be in a position to apply for re-finance again once the target has been reached.

Increasing the income is even harder but can be done by applying in joint names rather than by yourself, but this will likely only work if your other half is not too indebted themselves. Declare any forms of income that the lender will accept, whether it be benefits or pension income.

Regardless of the plan you choose to improve your chances of obtaining new credit (ideally both reducing outgoings and improving the level of income), it is important that you wait at least a month before applying to another lender and even longer before applying back to the same lender (they will inform you of their policy but it is usually 3 months).

Sometimes these adjustments aren’t possible and you may already be living ‘hand to mouth’, as it were and may feel stuck with nowhere to go. If you feel that your debts are out of control and that you cannot obtain credit at better rates, you may want to consider seeking independent debt advice.

Thinking long-term is usually the best way forward. Set targets and keep on going until you hit them, whether it be the removal of bad credit history or reduction of debt. If you stick to the plan, it can only get better but this will take a lot of effort and sacrifice. Don’t think it’ll be ok to carry on as you are because that will rarely be true. Be sensible, accept that life may be a little more dull for the near future but keep focusing on when you will be in a better position to enjoy yourself.

Check Your Multi-Agency Credit Report

30 Day Free Trial

Turned Down For Credit? Find Out Why.

Getting declined credit can be a huge blow to your plans, especially on potentially life-changing purchases like car finance or a mortgage. Even if you have a good financial history, there are plenty of reasons to get declined credit, and finding out why your application was declined and addressing this problem is the first step to making sure that you won’t be turned down the next time you apply.

Published on 4 Jan 2018 by Jamie Mackenzie Smith

Full Article

What to do if you get declined for credit

Have you been declined credit lately? When you apply for a new credit card or a loan, it is likely that you have the money earmarked for something in particular. Perhaps it’s a wedding, a holiday, or consolidation of existing debts. But whatever your reason for borrowing, being declined for credit can really throw you into a panic, especially when you have no idea why you weren’t accepted.

Published on 16 Mar 2017 by Kelly Luff

Full Article

Small businesses still struggling to find affordable credit

42.4% of credit applications have been turned down, up 1.8% on the previous quarter’s reported experience, according to latest reports from the Federation of Small Businesses (FSB).

Published on 24 Sep 2012 by Barry Stamp

Full Article

Another reason not to go bankrupt

The process of entering into a bankruptcy – whether forced or voluntary – is a difficult scenario for thousands of people in the UK each year, but the decision by the Co-operative Bank (Co-op) to stop offering bank accounts to undischarged bankrupts could be about to make things a whole lot worse.

Published on 18 Sep 2012 by Ian Carpenter

Full Article

Access to 'basic' bank accounts to get easier

The Government has called for people who have been declared bankrupt to be given easier access to bank accounts, as part of its wider investigation into consumer credit.

Published on 27 Jul 2010 by Richard Catlin

Full Article

Lenders may be forced to open up

Credit card and loan providers are set to be asked to be more transparent about the way they calculate the interest rates they charge consumers, as part of an Office of Fair Trading (OFT) review of their practices.

Published on 9 Apr 2009 by Richard Catlin

Full Article

Was it an unhappy Easter for Egg boss

So, Easter is over and done with for another year - and so is the reign of Egg boss Ian Kerr, who has quit the online bank after only a year in charge.

As we reported back in February, the credit card giant caused controversy by writing to 161,000 of its customers to give them 30 days notice that their accounts were about to be closed.

Officially, Egg said that the credit worthiness of these account holders had either declined to such an extent that they were no longer suitable customers, or were at risk of doing so in the near future. However, thousands of disgruntled cardholders – including at least three millionaires - with good credit ratings have claimed that this is merely an excuse, and that they have been punished for paying their balances in full each month and hence not making Egg any money in interest payments.

Egg has denied that Mr Kerr’s resignation had anything to do with the controversy caused by the card cull, and maintain that their decision was purely based on the risk of customer groups falling into default in the future.

The move was part of a wider cost-cutting exercise by Egg owners Citigroup, which took control of the Bank in May 2007. The global credit crisis has seen many lenders tighten up their belts, and make their acceptance criteria more stringent.

This means that getting a good deal on a new credit card is not as easy as it once was. With lenders still with their hands in their pockets, access to a card that has credit card cheques available can be a real contingency to cover any unexpected downturns in your financial fortunes. The current Best Buy credit card which still offers the option to use credit card cheques is the AA credit card. With a Typical APR of 16.9% this is well priced, and at present the card has a 0% balance transfer offer for 12 months (the transfer must be done in the first 90 days of the account opening and carries a fee of 3%) and 0% interest on purchases of fuel and motoring and AA costs for 12 months. There’s also a cashback option of 1% for AA members or 0.5% for non-members, or generous reward points.

Published on 3 Apr 2008 by Richard Catlin

Full Article
keyboard_arrow_left

keyboard_arrow_right

We have loads of great customer reviews