Why is my loan application being declined?
There are many reasons why your loan application might be refused.
Your application could be turned down if:
- You don’t meet the lender’s eligibility criteria. For example, if you’re outside of the lender’s set age or income requirements.
- You fail the lender’s identity verification. Perhaps the ID you’ve provided is out of date, or you are registered at the wrong address.
- You have a bad credit score and history. This could include defaulting on past credit commitments, declaring bankruptcy, or having a county court judgment (CCJ).
- You have limited or no credit history. This is commonly referred to as having a ‘thin’ credit file and typically happens if someone has never paid bills or borrowed credit before.
- You already have one or more active loans. Lenders may be wary about providing further borrowing if you already have credit commitments.
- You have made multiple credit applications in a short period. Several credit applications made too close together could suggest poor money management.
What to do if your loan application is turned down
If your loan application is declined, you could reach out to the lender. While some lenders won’t share information as to why your application was rejected, others may be willing to provide further details.
The contact details of the lender you applied with should be listed on their website.
Will an unsuccessful loan application affect my credit score?
While an unsuccessful loan application will not directly affect your credit score, the process of making an application could.
When you apply for a loan, the lender will complete a creditworthiness assessment, which will include a hard search or Open Banking. If you make multiple credit applications, there’s a chance that multiple hard searches could be carried out. Undergoing several hard searches in a short period will harm your credit score.
A hard search will be visible on your credit file for up to 12 months.
You could reduce the number of hard searches you undertake by using a credit broker, like CashLady. Using one soft search with no impact on your credit score, CashLady can scan a panel of multiple lenders at the same time to help you search for a suitable loan.*
How soon can I apply for a loan after being declined?
If your loan application is declined, you should try to wait at least 3 months before you make a further credit application. This could help to minimise the potential impact of multiple hard searches on your credit file.
Some lenders could have specific rules in place which prevent you from reapplying with them for a certain amount of time.
How to improve your chances of being accepted for a loan
Even if you have a terrible credit history, there are things you can do to improve your credit position and increase your chances of being considered for a loan.
1. Know your credit score
Familiarising yourself with your credit score is a good starting point when it comes to understanding your financial situation and the types of credit products that could be available to you. Your credit score plays a vital role in your credit applications, and being aware of your score could help you choose a suitable lender. For example, if you have a bad credit score, your chances of being considered for a loan could be higher with a lender who specialises in loans for people with bad credit.
2. Check the lender’s eligibility criteria
You must make sure that you meet the lender’s full eligibility criteria before you make an application. Applying for a loan that you are not eligible for will result in your application being rejected.
3. Register to vote
Being on the electoral roll at your current address could make it easier for lenders to verify your identity and personal information.
4. Check your credit report
It’s important to ensure that the information on your credit report is correct. Outdated or incorrect information could negatively affect your credit score.
You can check your credit report with either Equifax, Experian or TransUnion.**
5. Fill out your application as carefully and accurately as possible
Missed or false information could lead to processing delays or your application being turned down.
6. Be wary of financial association
Things like joint accounts and shared bills will financially link you to someone else, whether that’s a partner or flatmate. If the person you’re financially associated with has poor credit, it could negatively affect your own score and reduce your chances of being considered for credit, even if you apply on your own.
7. No or limited credit history?
You might be interested to learn more about credit builder credit cards. This type of credit card is designed for people with bad credit or limited credit history. When used responsibly to make affordable purchases which are repaid on time, a credit builder credit card could help you work towards a healthier credit position.
8. Credit card health
If you’re thinking about applying for a credit builder credit card, or you have a credit card already, it’s important to understand how this could affect your credit score. You should avoid using your credit card to withdraw money from a cash machine, be sure to stay inside your credit limit, and aim to keep your credit utilisation as low as possible.
How using a credit broker could increase your chances of being accepted for a loan
When you apply for a loan with a direct lender, they’ll check your eligibility for their product(s) only, and this may or may not be the right fit for your financial circumstances.
When you use a credit broker, like CashLady, to help you search for a loan, they’re able to scan a panel of multiple lenders for a loan that could suit you, based on your personal situation.
CashLady works with a panel of over 30 direct lenders who offer loans and loan alternatives for a range of different customers and circumstances. Several of the lenders we work with specialise in loans for people with bad credit.
Rather than having to spend time researching different lenders and wondering whether they could be a suitable match for your needs, CashLady can do the hard work for you.
Who can use CashLady’s credit broking service?
You’re welcome to use CashLady’s free credit broking service to search for a short-term personal loan if you:
- Are over the age of 18;
- Are a UK resident;
- Have a UK bank account and a valid debit card; and
- Have a regular source of income paid into your bank account.
Can I search for a loan with CashLady if I have bad credit?
Yes, you could still search for a loan with CashLady, even if you have bad credit.
CashLady works with several lenders who are willing to consider applications from people with bad credit.
Please note that a bad credit loan could come with a higher rate of interest. This will increase the cost of borrowing and your monthly repayments.
Important things to consider when you need a loan but keep getting declined
- A short-term loan could be a costly way to borrow money, particularly if you have bad credit. Is there any way that you could delay the expense and save the money instead? Could you reduce your outgoings elsewhere to free up the money that you need?
- You might consider looking into alternative options if you’re finding it difficult to get a loan. Borrowing from friends or family members could be an option, although you’ll both need to agree on a repayment plan, and you should both be aware of the risks to your relationship if something goes wrong.
- Whether through a lender or a loved one, you should only ever borrow money that you can afford to repay.
- If you’re already struggling financially and are finding it hard to repay your debts, it’s crucial to be aware of how taking on another form of credit could make your debt spiral worse.
If you need help with money or debt, the following organisations offer free, confidential advice: StepChange, MoneyHelper, Citizens Advice, and National Debtline.
*If you’re matched with a loan through a search with CashLady and you choose to make a full application directly with the lender, they will run a creditworthiness assessment, which will involve a hard search or Open Banking. A hard search will be visible on your credit file for up to 12 months. Multiple hard searches in a short period of time will damage your credit score.
**TransUnion and Experian are free to use. If you’d like a more in-depth view of your credit report, you could sign up for an Experian CreditExpert account, which costs £14.99 per month once the 30-day free trial period ends.
An Equifax account comes with a 30-day free trial period and is then priced at £14.95 a month.
