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When you apply for a loan, most companies will check your credit report to see what your financial commitments are. They may also look to see if the loan you have applied for is affordable for your current situation.
If you have recently applied for a loan and have been declined, you may be wondering why and what to do next.
In this month’s MoneyTalk blog we will help you understand why you may have been declined and what things you can do to help get accepted for a loan in the future.
If you have bad credit, have missed lots of repayments or have ongoing debts, then some companies may turn you down. Some companies may also decline you if your credit history is a little thin, as they can’t build a full repayment picture of your finances.
You may have also been declined if you don’t meet certain requirements that some loan companies have set. For example, you may be under an IVA and some loan companies won’t lend to you if you’re under that agreement. Not sure if you’re under an IVA or know what one is? You can read more about it in our ‘What is an IVA blog’.
You may think that applying to a few companies may help you get a loan or get one faster. However, this can damage your chances of being approved. Each time you make an application, it will show up on your credit report, and multiple applications can make you look like you rely on loans.
Some companies won’t let you re-apply for a loan straight away and instead will give you time to increase your chances of being accepted next time. This could just be making regular payments to a bill, or that you haven’t missed any regular payments.
Although loan companies don’t have to tell you why they have declined your application, if you ask then they might tell you what the reason was.
Asking for feedback can help you get on track for future loan applications.
It’s always a good idea to keep an eye on your credit report for many reasons. You can check if the details that are held are correct as mistakes do happen. You can also check what is impacting your credit score – you may be able to make some changes that will improve this.
If you have been declined for a loan and are struggling with debt, there are lots of places that can help. Citizens Advice Bureau and StepChange offer free debt advice that could help improve the situation.
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