A guide to bad credit rejections – how to overcome this

Have you been rejected for loans? Are you worrying how to rebuild your credit status? This guide will offer you tips on what to do next.

Why am I being rejected for credit?

When you apply for credit, lenders check the information on your credit file. This includes information on your current borrowing, electoral roll information and your management of bank accounts. Lenders check this information to make sure that you will be able to make the repayments.

If you are being rejected for credit, here are a few potential reasons why.

  • You may have missed payments or defaults on your credit report.
  • You do not meet the lenders criteria, for example, you earn under their minimum income.
  • You have made several credit applications over a short time frame.
  • You’re not on the electoral roll which means lenders are wary of your identify.
  • There are mistakes on your credit file or missing information.
  • You have 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 credit? 

If you have been rejected for credit do not continue to apply. Firstly, check your credit report (from Equifax, CallCredit or Experian) and check there are no payment defaults. The problem is that if you continue to apply and are subsequently rejected for a loan within a short amount of time, your credit rating will be badly affected. 

As well as checking your credit report, it may be worth using a pre-application checklist, which will test your eligibility for the loan before it is applied for. This way you can determine whether the credit was rejected as a result of poor rating, or due to one off lender specific reasons. The Freedom Finance loan application checklist can be found here: https://www.freedomfinance.co.uk/guides/loan-application-checklist/

Can I use a card to rebuild my credit rating?

You may wish to transfer the credit you already have onto a lower interest or interest free card using a balance transfer. This will lower your repayments to allow you to pay off the card faster by chipping at the loan, rather than the interest. For more information about balance transfers, visit: https://www.freedomfinance.co.uk/guides/a-guide-to-balance-transfers/

Using a pre-application eligibility checker will allow you to gauge your chances of obtaining the credit without the lenders seeing your application. This will have no impact on your ‘creditworthiness’ and so will reduce your chances of being rejected in the future. If the pre-application eligibility checker shows that the only cards you will be able to apply for come with massive interest rates, it may be wise to evaluate whether or not you really do need to borrow. 

There may be budgeting tools you can use to better manage your finances, such as our monthly budget planner: https://www.freedomfinance.co.uk/guides/freedom-finance-personal-monthly-budget/. Or if you are still struggling, there are free debt advice services available to help you.

How can I rebuild my credit rating once I have been accepted?

If you have been accepted for another credit card this can actually help to rebuild your score providing that the card is paid off in full, every month. Even if you do not need the card, it’s wise to spend a little on it each month then repay the amount fully. This will prove to future lenders that you are a worthy candidate for credit because you can manage your finances sufficiently well to repay debt in full every month. 

Be careful though, because often specialised ‘credit rebuilding’ cards come with high interest rates, which isn’t a problem if they are paid off in full, but can put you in a worse situation if it is not repaid. 

The best tip with lending is to only borrow what you can afford to pay back. Although it is tempting to request the highest level of credit available to you, by borrowing and repaying a lesser amount, your bad credit will become a thing of the past. For more information about how to improve your credit score, visit: https://www.freedomfinance.co.uk/guides/tips-to-improve-your-credit-rating/