If you’ve been rejected (don’t you hate that word?) for a loan, don’t worry. It happens to people all the time and it could be for a number of reasons. To help you figure out why, we’ve put together a quick guide on what to do next.
Why might you be rejected for credit?
Every time you apply for a loan or credit, the lender checks out your credit file. This is a file held by credit reference companies that gives details about your current borrowing, your electoral roll information, as well as indications about how well you manage your money.
If you’ve been turned down for a loan or credit, there are a number of potential reasons why this might have happened:
- You may have missed payments (these are often called ‘defaults’) for loans or credit in the past.
- You’ve made several credit applications over a short space of time.
- You’re not on the electoral register (which lists the names of everyone registered to vote). Lenders use this to confirm your address and where you have lived before.
- You’ve recently moved into a new house or have a new job.
- You don’t have any previous borrowing history.
What can I do if I have been turned down for a loan?
If you’ve been rejected for a loan or credit, it’s best if you don’t try again immediately as your credit score might be negatively affected.
The first thing you need to do is get your credit report and check there are no payment defaults (missed payments) or mistakes listed on your file. If there aren’t, you’ll then need to try to rebuild your credit score.
To learn more about this, read our guide on how to improve your credit score.
Spotted a default? Check out our blog covering how to bounce back from defaults on your credit file.
Can I use a credit card to rebuild my credit score?
Yes, this can help rebuild your credit score. And, even if you don’t need the card, it’s wise to spend a little on it then repay the balance in full each month. This shows you can manage your finances well enough to repay your credit card debt on time.
Just remember to repay the balance in full every month. Otherwise you’ll find yourself not only paying high interest rates, but this could also have the opposite effect and negatively impact your credit score.
For more information on using credit cards, check out our guide to choosing how to borrow.