If you’ve been turned down for credit, such as an overdraft, it’s important to find out why as you might be able to make some changes. Discover how to improve your money situation, from budget planning to improving your chances of borrowing.
Find out why you’ve been refused credit
Lenders probably won’t tell you why you’ve been refused credit. While they don’t have to give you a reason, they should tell you which credit reference agency they used to assess your application. You can then ask them for a copy of your free credit report.
There are many reasons your application might have been turned down. These include:
- a history of missed payments or possible fraudulent activity on your file
- the lender deciding you wouldn’t be able to repay
- not meeting a lender’s specific terms and conditions, such as a minimum income level, or a mistake on your credit report – such as a typo in your address or other detail.
What to do if you’ve been refused credit
The next steps depend on the reasons you were turned down.
Problems with your credit file
Improving your credit score might increase your chances of being able to borrow in future. You can also fix any mistakes you see on your credit report. Find out more in our guide How to improve your credit score.
Not passing affordability checks
Being turned down for credit might be a good opportunity for you to think about your current money situation and ways to live on a budget. This will help you get your finances back on track for when you next apply for credit.
If you’re trying to borrow to pay off other bills or living expenses, check if you can reduce or cut these costs. For example, think about how you could try to reduce the size of your overdraft or increase your credit card repayments to avoid paying so much interest. You might also be able to switch to a better deal with another provider.
If you’re facing higher living costs, find out about extra sources of income and support in our section Help with the cost of living
Recent missed payments
If you’ve missed payments on essential outgoings (such as rent, mortgage, Council Tax, energy or water bills), credit cards or loans, contact a free debt advice service as soon as you can. They’ll help you work out which debts you should repay first to stop you getting into more financial difficulty.
Experian has more guidance on what to do next after being turned down for creditOpens in a new window
If you’ve been a victim of credit fraud
When you check your credit report, look for a Cifas Victim of Impersonation noticeOpens in a new window A Cifas marker warns lenders that you’ve been, or are vulnerable to being, a victim of fraud. The marker will stay on your file for 13 months.
This doesn’t affect your credit score and shouldn’t stop you from taking out credit, but it might cause problems or delays if you’re applying for credit that’s processed automatically such as Buy Now Pay Later. This is because a lender would have to carry out a ‘manual review’ of your file to understand why the marker has been added.
If you’d like lenders to make extra checks every time you apply for credit, you can pay for Cifas’ Protective RegistrationOpens in a new window
Be careful before applying again
Whatever your reason for borrowing, it’s important to think carefully before applying again. This is because most credit applications show up on your credit report.
Several refused applications in a short space of time might damage your credit score even more. This is likely to make it harder to borrow and affect the interest rates you’re charged if you do get credit. To avoid making too many applications, use eligibility checkers to see how likely you are to be accepted first. These use ‘soft searches’, which make no impact to your credit score. MoneySavingExpertOpens in a new window, Credit KarmaOpens in a new window and ClearScoreOpens in a new window all have eligibility checkers you can use.
If you need the money now, there might be other ways to borrow, such as credit unions, employer salary advance schemes or Community Development Finance Institutions. But it’s important to avoid being tempted to take out high-cost credit that you might be able to get but would struggle to afford, such as payday loans.
Beware of loan sharks
Loan sharks target people who struggle to borrow money from regulated lenders. Find out why it’s important to avoid this form of illegal lending in our guide loan sharks and how to spot them
Find out more about what other forms of more affordable credit are available and how to avoid high-cost options in our guide Payday loans – other ways to borrow
How to deal with money problems when you have poor mental health
Poor mental health can affect the way you deal with money, and feeling low can make it harder to deal with money problems. But be aware that there are many ways to get help – both with your money situation and your mental health.
Find out more in our guide Money problems and mental wellbeing
