Why Can’t I Get a Loan?

We understand that applying for loans and receiving rejections can be stressful, especially when you urgently need the funds. Whether your application is rejected because you have a history of missed payments, or you're asking for more money than the lender thinks you can afford, you're not alone. Loan rejections in the UK aren't uncommon, but you’re not always told why you weren’t approved.

In this guide, we explain why this might be happening and what you can do to improve your chances of future loan approvals.

Why are loan applications declined?

Many people mistake a loan application rejection for a credit score issue, but there’s actually no universal credit score that guarantees you’ll get a loan.

Lenders make loan decisions using their unique criteria, information from the application, your credit report (not score), and, in some cases, information they already have about you - for example, if you're asking a bank for the loan and you already bank with them, they’ll likely take the data from that existing account into consideration.

Affordability and income

The Financial Conduct Authority (FCA) rules require lenders to make reasonable assessments before approving loans. This is meant to ensure the credit is affordable, avoiding the risk of you struggling or failing to repay. 

When assessing affordability, lenders also consider:

• Whether you can make repayments without borrowing to make them, meaning you have enough disposable income to make repayments.

• Whether lending money could cause you to miss other contractual or statutory payments.

• Whether a loan is likely to harm your finances.

So when they ask about your annual salary, expenses, current debt repayment commitments, and other financial-related questions, it's because they're assessing your affordability. That's why you can have an excellent credit score but be refused a loan once you’ve done the affordability assessment.

Too many recent credit applications

Lenders can't always see whether recent credit applications were successful, but they can see how many you've made. Credit applications are hard searches, which lenders can see because they’re filed on your credit report. Having too many hard searches on your report in a short space of time can negatively impact your credit score and your chances of being approved for a loan.

Try to avoid making multiple credit applications in a short period. Applications can remain on a report for around 12 to 24 months, depending on the credit reference agency (CRA).

Missed or late payments

Missed and late payments appear in the payment history section of your credit report and can indicate that you've previously had difficulty meeting credit requirements. As a result, that can influence a lender's assessment of repayment risk.

While a single missed payment doesn't automatically cause a rejection, how recently the payment was missed, your wider payment history, and the lender's criteria do.

Open accounts on your credit report can show the last six years of their payment history. This means that if you miss a payment today and keep the account open, that payment marker might not fall off of your report until six years from now. 

Closed accounts stay on your report for six years from their closure date, and can report up to six years of their payment history for that time. 

This means that if you close an account with a late payment in its history, that late marker can stay on your report for six years from the date you closed the account, not just the date the late payment was recorded.

The good news is that even though late payment markers can stay on your report for a while, they don’t have the same impact for that whole time. The older a late payment marker is, the less importance it has to lenders when you apply for credit.

So, a late payment from several years ago is much less likely to cause any issues than a late payment from last week, especially if you’ve kept on top of your payments in the meantime.

Mistakes on your application

You can have a 999 credit score but be refused a loan if a mistake on your application means that the details you’ve provided don't match what's on your credit report. Examples of potential mistakes include:

• Incorrectly formatted or outdated address.

• Inconsistencies in name/address history.

• Inaccurate information about finances.

Data suppliers (like your bank, local authority, and existing lenders) share the information they have for you to the credit agencies. The agencies will use the name, address and date of birth this data is registered in to match the information up to you.

If the details on your credit application differ from those your data is registered in, even if the difference is a simple typo, it can mean that information is missing when the lender is viewing your report.

Financial associations

A financial association is normally created when you enter a joint financial arrangement or make a joint credit application, such as a mortgage, loan or bank account.

Living with, marrying, or being related to somebody doesn't automatically make them a financial associate, and a financial association doesn't directly affect your credit score or affordability. 

That said, a lender may check the associate's financial information when assessing your credit applications. Adverse information or substantial financial commitments belonging to the associate could therefore influence the lender's decision, especially if it’s a mortgage application.

If you see an associate name on your credit report and you’re no longer financially connected, you can request that the relevant CRA remove the name.

This is easy to do through Checkmyfile using the steps outlined here: How do I remove a financial association?

Not on the Electoral Roll 

The Electoral Roll lists the names and addresses of everyone who's registered to vote. The CRAs use your entry on the Electoral Roll to help prospective lenders to verify your address and identity.

If you're not registered to vote at your current address, or a discrepancy is preventing your registration from showing on your credit report, the lender may experience issues verifying your identity. This can adversely impact your chances of being approved. 

If you’re not eligible to vote in the UK, we’d recommend making sure the lender is aware of this before you apply. You can also add a Notice of Correction (NOC) to your report to explain this to prospective lenders, though this may slow your credit applications down.

Tips to increase your chances of loan approval

1. Check your credit report for errors

Check your full credit report yourself before you make your application, so you don't risk adding an unnecessary hard search to your file if an application gets turned down.

Checkmyfile is the only service in the UK that returns your credit information from Experian, Equifax, and TransUnion to you in one convenient report.

If you spot any errors, you can reach out to the organisation that's created the data to get the record corrected. Our team is also here to assist you with our data dispute service if you need us.

Remember, it can take 4-6 weeks for changes to show on your credit report, so the sooner you get things sorted the better!

2. Make sure you can afford the loan

Loan affordability is about more than just being able to repay the headline amount. It’s important for responsible lenders that you can comfortably afford to make your repayments, alongside your existing expenses, with plenty left over at the end of the month just in case.

3. Don't apply for multiple loans in quick succession

Avoid making repeated applications. We know it’s tempting to do this if you keep getting declined, but each new credit application creates a hard search entry on your report. Having several of these in a short span of time can lower both your score and your chances of being approved for credit.

Use eligibility checkers/quotation searches first. These generally use soft searches, which other lenders can't see and that don't affect your credit score the way hard searches can.

4. Check your financial associations

Check that everyone listed as a financial association is someone you still have a financial connection to. If all the joint accounts and credit agreements you had with them have ended, you can ask the relevant CRAs to remove the association.

5. Make sure you're on the Electoral Roll 

You can check your credit file to see whether you're on the Electoral Roll. We also recommend confirming with your local electoral registration office to ensure the details are correct and up to date, and checking that the format of your address on the Electoral Roll matches up with your credit agreements and application.

Note: Updates aren't always immediate after registering or moving home. Councils usually update the CRAs periodically, so there can be a delay before the new information appears on your credit report.

6. Speak to the lender

If you've checked your credit report and application, but it's still not clear why you've been declined, you can always contact the lender directly. 

Make sure you have your application details (like your name, email address and reference number) to hand when you reach out. 

Not all lenders will be able to specify the reason your application was declined, but many lenders can, so it's always worth asking.

Does getting declined affect your credit score?

Whether or not an application is successful won't affect your credit score, but each application creates a hard search entry on your report. 

Hard searches can affect your score, and having multiple recent hard searches can risk putting off your next potential lender.

That's why it's best to try and find out why you've been declined first, before you consider applying again.

Check your credit report with Checkmyfile

At Checkmyfile, we've made it easy for you to check your credit report. 

We know that the UK's three major CRAs operate completely separately from each other, which can make it difficult to track down the exact version of your credit file that a lender is seeing.

Our report shows you your Experian, Equifax, and TransUnion data side by side, giving you the most accurate overview of all the information that's out there for you.

The report is downloadable, easy-to-read, and comes with plenty of help and support from our friendly UK-based customer care team.

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