Why you may be turned down for credit
Written by: Cally Worden
Until the banking crisis in 2008, lenders were virtually throwing money at people and getting a loan or credit was practically routine. After coming under fire for irresponsible lending, they clamped down and the repercussions of that are still being felt six years later. Even now, getting refused for credit can feel like a body blow, as if lenders are somehow casting aspersions on your reliability and moral standing. Borrowers need to be aware that the lending landscape has changed forever and be prepared to fight hard to secure the trust of lenders. If you are refused credit try not to take it personally. Here are five possible reasons why it may have happened:
You’ve Never Borrowed Before
In assessing your application, lenders will consider many things, including your credit rating. If you’ve never had credit before your rating will be low – in effect you have not yet proved your credit-worthiness. Ways around this include highlighting your track record of regular bill payments and the responsible use of overdraft facilities you have demonstrated over a period of time.
| Lender | Loan Amount over 60 months | Representative APR% | Cost | |
|---|---|---|---|---|
 | £5,000 | 15.9% APR | £121.32 per month | Apply |
 | £5,000 | 48.5% APR | £222.76 per month | Apply |
 | £5,000 | 6.9% APR | £98.28 per month | Apply |
 | £300 over 65 days | 574.86% APR | £136.51 per month | Apply |
Your Face Doesn’t Fit
Believe it or not, lenders are conscious of the general profile of their borrowers. At any given time they may be seeking more borrowers from a particular age range, or socio-economic background. If your profile falls outside of these moving targets at the point you apply, you may find yourself out in the credit cold.
You’re Not on the Electoral Role
Combating fraud and money laundering is of big concern to lenders. They like to know that the people they are lending to are indeed who they claim to be and live where they say they do. One of the simplest methods for ascertaining this information is to check the Electoral Register. If your name does not appear, or there is a conflict between your current address details and those on the Register, this acts as a red flag and you may be refused credit on this basis alone. Keep your Electoral Register data current whenever you move home to avoid this common problem.
You’ve had Financial Difficulties in the Past
CCJs and missed credit repayments can stay on your credit record for three years and restrictions from bankruptcy up to six years. You may now be happily solvent and in control of your finances, but if you had a previous problem with money lenders may still be wary of throwing cash your way. You may be able to challenge a refusal to grant you credit on this basis if you can demonstrate that is was circumstance (job loss, illness, divorce, etc), and not money mismanagement, that led you into debt
Your Credit Record shows Numerous Searches
Every time you apply for any form of credit, a search will be run on your Credit Record. Even if you never actually take the credit you have been assessed for, or if it was a short-term loan that has long-since been paid off, multiple credit searches make lenders cautious. They may view you as a bad credit risk because you’re seen to ‘need’ to borrow money.
If you are refused credit or a loan then do ask why. The problem may be simple to resolve, or it may be the case that you have to play a waiting game until your credit record looks more healthy. Take heart from the fact that many people who have had financial difficulties in the past do go on to secure loans, mortgages and other forms of credit once their finances are back under control and a new track record has been established.
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