Tired of getting your payday loans declined? More than 75% of short term loan applications are declined.
Lenders go through detailed affordability assessments for every applicant. So what should you do when you’re getting payday loans declined and you cannot get the funds that you need?
It is important to understand why your loan has been declined. You may want to find alternative options.
You can also improve your situation so that applications are more likely to be approved in future.
Understanding why your loan application was declined
Immediately after your loan is declined, you are likely to want to know why.
There are a few things you can do.
Speak to a direct lender
If you applied for a loan through a direct lender, then you may wish to speak to them after your loan was declined.
Many will give cookie-cutter responses, letting you know that you failed their affordability assessments. If this is the case, you may not get more detail about the factors that affected the decision. Lenders use complex algorithms to assess how likely you are to repay your loan.
Some lenders are happy to share more information. The reason behind the loan being declined may be more obvious.
Lenders may be able to tell you if you failed the credit check, or accidentally provided incorrect information.
Check your credit rating
In the UK, your credit file is kept by three credit referencing agencies.
Lenders will check with one, or more, of these agencies.
Your credit score is accessed during a credit check. Each lender should conduct a credit check as part of their decision-making process.
Your credit score may be different with each agency. The lender’s decision may be harmed by which referencing agencies they use. But, in most cases, your scores will be similar with each.
Checking your credit rating should give you an insight into why your application was declined. A low credit score suggests that you are a financial risk.
There are many options that allow you to check your credit score, and review your credit file, completely free of charge. Noddle is one of these services.
Improving your chance of a loan application being approved
To reduce the risk of having payday loans declined in the future, you can make efforts to improve your chances.
Check your credit file
When you check your credit file, you can make sure that it is up to date and accurate.
Any incorrect information could negatively affect your credit score.
Look for signs of credit applications that you did not make. Make sure that your address details, including previous addresses, are correct.
If you are not already on the electoral roll, now is the time to register. This is one of the quickest and easiest ways to improve your credit score.
If you feel that there are mistakes on your credit report, you can contact the relevant credit referencing agency. They can run an investigation, correcting details if they are found to be wrong.
What should you do if an organisation refuses to change information they have provided, but you still feel that it is false? Well, you can add a notice of correction with a space to write your own comments.
Check your credit file often. It is best to act as quickly as possible when incorrect details are shown.
Improving your credit rating
Credit repair is important if your credit score is low.
Often, a low credit score is not because of inaccuracies in a credit report.
If your credit score is low due to a lack of borrowing history, or problems with debt management in the past you will need to improve your credit rating.
Credit repair takes time. There are no instant fixes.
You will need to pay all bills and debt repayments on time.
Close down any lines of credit, such as credit cards and store cards, that you are no longer using.
Moving house often can have an impact on your credit score, as can being financially associated with someone that has poor credit. You could have a damaged credit score because you have a joint account or mortgage with someone that has a poor credit rating.
Remember that credit applications can damage your score. Do not apply for any credit unless you are sure that you need it. Before applying for credit, you should make sure that you have a chance of being approved.
Payday loan comparison sites and brokers
Brokers, and comparison sites can bring you a variety of loan offers.
They may increase your chance of loan acceptance because your request for funds will be sent to many lenders.
It is likely that many lenders will still decline your loan offer. However, a few could offer a loan with terms that suit your needs.
When your application form is sent to a portfolio of lenders, you may get one or two positive responses on a pre-approved basis. These lenders are more likely to offer a loan, once you complete the application process through them directly.
Making many separate loan applications can negatively affect your credit score.
Using a broker or comparison site, you will send a single application to every lender at once. When the lenders check your credit file, they will not see a recent history of failed loan applications.
Credit builder cards
You might want to improve your credit score with a credit builder card.
These are cards that come with a small loan stored on them.
You agree to repay the loan with a small monthly payment, to show that you can keep to your financial commitments. You will pay a fee for this service.
Credit cards for poor credit
If you have a low credit score, you may still be able to get a credit card.
Be aware that these come with high interest rates. Borrowing money on these cards can quickly send you into a debt spiral.
Only get one of these credit cards if you have the willpower to limit your spending to small amounts, and can repay your debt in full every month.
If you can make small purchases on your credit card, and clear the debt by the end of each month, then your credit rating will slowly improve.
Payday loans declined? Here’s what to think about
How much you need a payday loan
Payday loans are a high interest credit option.
If you can avoid borrowing money, then you should do so. Can you reduce your expenditure elsewhere, to free up the money that you need?
Payday loan alternatives
Look into payday loan alternatives, if your application is declined by the lender.
Borrowing from friends or family members could be an option if you are happy to discuss your financial situation with them.
You should only borrow money if you can afford to make repayments. You should know how and when you will be able to clear your debt.
If you are already struggling financially and finding it hard to repay your debts, taking out another loan can make your debt spiral worse.
You should not borrow more money to service existing debts.
Also, do not take out a lot of payday loans.
If you are struggling, reach out for debt management advice. A debt management service can help you to find solutions, such as a Debt Management Plan or bankruptcy.
Consolidating your loans is sometimes an option. Only do this if it will reduce your monthly repayments to a more manageable level and work out beneficial by reducing the fees you are paying.
Remember that, in most cases, debt consolidation will extend the amount of time that you are in debt for.
Payday loan amounts
If your financial situation is generally a smooth one, but you have a one-off emergency to cover, you are the right kind of customer for a payday loan.
You should not borrow more than you need.
Do not be tempted to ask for a bigger loan, so that you can buy yourself a treat as well as covering any important expenses.
You may be approved for a smaller loan.
Be aware that you should not limit your loan amount too much.
Make sure that you cover everything that you need with your loan. You could be in a worse financial situation if you do not borrow enough money to pay for the essentials.
This is a fine balancing act. As such you need to request a big enough loan, without borrowing any excess money.
Declined payday loan applications: Summary
Since the FCA stepped in with tighter regulations, the majority of payday loan applications are declined.
If your loan request has not been approved, there could be many reasons for the decision.
You may not find out exactly why your loan was declined, but you can take steps to avoid the same happening again.
You should check that your credit file is accurate. Plus you may need to check with many credit referencing agencies – Callcredit, Equifax and Experian.
Improve your credit score by managing existing credit effectively. You may want to use a credit builder card, to create a record of on-time repayments.
If you still need a payday loan, consider using a broker or comparison site. You may also be able to increase your chances by requesting a different loan amount.
Consider alternatives to payday loans, such as borrowing from family and friends.
If you are in financial difficulty, it is important that you do not borrow money from a payday lender. Therefore seek advice on debt management, rather than adding to your money problems.