Whenever you make an application for credit or borrowing, you will almost certainly be subject to a credit check using data from one or more of the UK’s Credit Reference Agencies. It can be an anxious moment while you wait for a decision and sadly there is always a chance that you’ll be turned down.
If you are unfortunate enough to see your application declined, it can often come as something of a shock – made worse by the fact that you probably won’t be given a specific reason for the rejection. Even if you do ask, most lenders will provide nothing more than a vague reference to “something on your Credit Report” before recommending you check the information for yourself with a Credit Reference Agency.
So why did a Credit Reference Agency reject your application? In short, it didn’t.
Before we go any further, now is probably a good time to say that you can find out what information is held about you by checking your Credit Report. checkmyfile is the only Credit Report that shows you data from the three main UK Credit Reference Agencies, so if you haven’t already, you can try us free for 30 days, then for just £14.99 a month afterwards.
Who decides whether or not you get accepted?
Even though a prospective lender will access information held on your Credit Report directly from a Credit Reference Agency when it carries out a credit check, it’s important to recognise that your Credit Report contains just that: information. The decision to accept or refuse an application lies entirely with the lender and its own lending criteria. The Credit Reference Agency merely presents them with the majority of the data used to make that decision.
Lenders use the information contained in your Credit Report to assess what sort of borrower you have been in the past and based on that, how you’re likely to behave in the future. Whether an application is accepted (and in some cases, the interest rate that is offered) will depend to a large extent on what your Credit Report says about you, along with other information you may be asked to provide such as your employment status, salary or certain regular outgoings, such as childcare fees.
It’s then down to the lender to assess all the information it has on-hand to work out whether it thinks you represent the sort of customer it is looking for.
That’s why being declined by one lender doesn’t necessarily mean that you will be rejected by another. The level of caution and acceptance criteria from the lender will also vary significantly according to the type of credit you’re applying for. For example a mortgage lender will be much more cautious than a store card provider, because they stand to lose a far greater sum if the borrower defaults on payments.
Credit Reference Agencies themselves have no say in the outcome of any application – the decision is solely down to the individual lender.
What do the Credit Reference Agencies do?
The three main Credit Reference Agencies in the UK are Equifax, Experian and TransUnion each of whom hold information independently of each other. Because each agency will have a different portfolio of lenders it receives updates from, the information that each holds will often differ.
Governed by the Principles of Reciprocity, information is shared with relevant parties, aimed principally at encouraging responsible and accurate lending as well as fraud and identity theft prevention and anti-money laundering.
Any of your data that is shared is required by law to be as accurate as possible, to the best of the Credit Reference Agency’s knowledge. It is presented without any form of commentary or opinion about your Creditworthiness.
So why might I have been turned down?
There are a wide range of reasons that you could have been declined credit, but without checking your Credit Report for yourself, it’s unlikely you’ll be able to say for certain what the main reason is.
These are some of the most common causes:
A poor credit history
This is the most common reason for being declined. Your payment history and the way you have managed credit agreements in the past is one of the key elements in any lending decision. That’s because this has been consistently proven to be a strong indicator as to how you are likely to behave in the future.
All lenders differ in their appetite for risk but if you find that your Credit Report contains negative information, it’s highly likely that this was an important factor in being turned down. This could range from the odd late payment to serious Court Information or Insolvency.
Incorrect information
Even if you’ve managed credit agreements carefully in the past and made payments on time each month, there is still a small chance that you could have been declined credit if some of your information is recorded incorrectly.
Errors on Credit Reports are rare, but they do happen. Lenders checking the information will assume everything in front of them is correct, which can have an effect on the outcome of your application.
Missing or limited information
In some situations a lender could turn down an application simply because it has been unable to successfully match you to your Credit Report. This could be due to an issue with your address, or simply because you don’t have enough of a Credit History on which to base a decision.
Your Electoral Roll listing is one of the more common examples of where data can sometimes get missed off is something that can have a surprising amount of influence on a lending decision – especially if the rest of your Credit Report is a bit ‘thin’.
How do I fix a mistake made by a lender?
If you find a mistake on your Credit Report, thankfully it’s usually quite simple to resolve – as lenders and Credit Reference Agencies are legally-bound to ensure everything reported about you is as accurate as possible, so it’s in their best interests to make sure your information is corrected.
Credit Reference Agencies receive information voluntarily and do not actively solicit information from lenders. As such, if you find an error on your Credit Report we always recommend contacting the lender reporting the information directly as a first port of call. The lender is the source of the information and owns and controls the data and can instruct changes if it agrees that an error has been made.
For more help on this, you can follow our guide on changing wrong information on your Credit Report.
Until you’ve checked your Credit Report for yourself, you don’t know what information a potential lender will be using to make a decision. If you haven’t already, you can try checkmyfile free for 30 days then for just £14.99 a month afterwards, which you can cancel online at any time.