Getting declined credit can seem like 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.
In some cases the presence of negative information (such as a CCJ or default) leads to a declined application, but you can still be turned down for credit even if you’ve never missed a payment or borrowed in the past.
Don’t be tempted to apply for credit from too many places all at once
When a lender checks your credit history, they perform an application search (often called a “hard search”) which leaves a footprint on your credit history. Like fast food, these are fine in moderation (we recommend trying to keep it to no more than 10 applications per year), but too many in too short a space of time can lead to problems.
The dangers of hard searches on your credit file are easy to overstate (and regularly are), but for most people they don’t pose much of a risk.
Because application searches are visible to lenders, some may see it as a sign that you’re desperately trying to borrow money, which could indicate you’re undergoing financial problems, and could struggle to meet repayments as a result.
If you’ve just been turned down for credit by one lender it’s only natural to try somewhere else, and you shouldn’t be afraid of doing so. But if you’re repeatedly getting turned down, it could be a sign that something about your application or something on your Credit Report is putting them off.
Every lender works to their own criteria and what may be an issue for one lender might not be a problem for another so you shouldn’t worry about applying somewhere else if you’ve been turned down for credit.
Declined store finance?
These days it’s common for many highstreet stores or online sites to offer credit cards or finance on more expensive products. This system makes it easier to make big purchases and often rewards loyalty for regular customers, but you’re not guaranteed to get accepted right off the bat.
Most stores use an automated process when issuing store finance, but there are a number of items that could appear on your Credit Report that require manual assessment, which the automatic system is not able to deal with.
If you have a Notice of Correction, Cifas marker or even incorrect entry marking you as deceased, this could prevent you from taking out store finance, as they would all require an underwriter to manually assess your Credit Report.
Turned down for car finance?
Like any other kind of finance there are many reasons to be declined credit, such as if the lender calls into question your affordability, but for some purchases the lender might base their decision on the asset’s actual value.
Occasionally car finance companies may refuse a loan if their opinion is that the car is priced too highly against its ‘real’ value (the current market value for the vehicle). That’s because if you fail to keep up payments, the lender can repossess the vehicle and sell it on to recuperate their losses. If they deem that they would have to loan you more money than the car is worth, it will be difficult for them to make this money back when they have to sell it.
For example, say you wanted to borrow £10,000 to buy a 2010 Ford Focus with reasonable mileage considering the car’s age. If the finance company knows (or finds out) that similar examples regularly sell for half that price, they might be reluctant to agree to the terms on the basis that if you fail to make payments, they’re likely to be £5,000 out of pocket if they have to repossess and sell the car.
If you’re in the market for a new motor, read our guide to getting the best deal on a new or used car.
New to finance credit applications?
If this is your first time applying for any kind of credit, don’t take it too personally if you’re rejected; it probably means potential lenders are erring on the side of caution because there isn’t enough payment history on your Credit Report to determine how likely you are to make their payments on time.
Getting turned down on this basis doesn’t mean you have a bad credit history, it means you have no credit history.
That’s why it’s important to make sure that all the information that is on your Credit Report is up-to-date and correct: this will give you your best chance of getting approved when you don’t have much of a credit history to show. Lenders will still look at this information to assess how difficult it would be to get in contact to discuss repayment.
If time is on your side, applying for a credit card and spending responsibly on it will help prove to future lenders that you can be trusted to make payments, which can be helpful when the time comes to apply for a mortgage.
Mistakes on the application or report
As with anything that involves an application process, there is plenty of capacity for admin errors. Whether your name or address are put down incorrectly or a character has been missed off somewhere, anything that doesn’t line up with what’s on file has the potential to confuse the application process and in some circumstances, end up costing you more.
Making sure you’ve got everything written down as it appears on your Credit Report is a good way to avoid rejected applications, but it’s also equally important to make sure that everything on your Credit Report is correct and an accurate representation of you.
Be sure to check that all bank accounts and information are listed at your current address to fill any gaps in your financial details.
If something is incorrect on your Credit Report, it's legal duty of the party reporting to amend this, so you should never have to suffer as a result of the wrong information. Changing errors on your report is easy if you can prove it is indeed a mistake, which is why it’s always recommended for the best chance of getting finance.
Wrong demographic
Even if you’ve got a great Credit Score and spotless history, you might not fit the demographic that the provider is looking for.
Some lenders might only take on customers for certain finance products if they think that customer will be more likely to take out a loan or mortgage with them in the future. Others might not take on customers with a good credit history for a sub-prime card because they won’t be as profitable customers if they’re not likely to make late payments.
Is it possible to be turned down because of my address?
Your creditworthiness is something that’s uniquely attributable to you, it’s not affected by the house you live in or the affluence of your postcode. Though your Credit Report includes addresses you’re associated with, the houses’ previous tenants or your neighbour’s borrowing or spending habits won’t affect your ability to get credit.
The only way your address may play a part in you being refused finance is if it’s listed incorrectly on your Credit Report and it prevents the lender from being able to find your Credit Report and retrieve your information.
Am I on a credit blacklist?
Lenders don’t keep or refer to any kind of blacklist when they assess your application, and nor would they need to when they can clearly see your past six years’ worth of credit history right in front of them on your Credit Report.
If you have been turned down for credit by multiple lenders, the most likely cause is because something in your application, whether it be the terms you have requested, information on your Credit Report, is widely unpopular with lenders.
How to find out why you were declined
Even lenders themselves aren't likely to give the exact reason why you may have been turned down for credit. Your best chance of finding out if there’s something holding you back is to check your Credit Report for yourself to see what information is held about you, and if necessary, get expert help in understanding what it means.
Lenders will retrieve your Credit File information from one or more different Credit Reference Agencies, and the information held on you may differ (and potentially show very different versions of your credit history) depending on which agency is checked.
That’s where checkmyfile’s Multi Agency Credit Reports come into their own: we show you your Credit History from the UK’s three main Credit Reference Agencies, which means when you check your report, you’ll be able to see what lenders see no matter which agency they check with.
If you haven't already, you can try it free for 30 days, then just £14.99 a month and cancel online anytime. You'll get full access to the UK’s most detailed Credit Report and get support from our professionally qualified Credit Analysts who will be happy to help and give expert insights if needed.