Been turned down for a loan?

The credit myth

It has never seemed easier to borrow money, so if you do get turned down, the obvious question is "Why?" swiftly followed by the suspicion, "Maybe I'm on a credit blacklist". The good news is that you're not. In fact, there's no such thing as a credit blacklist. But there is a host of reasons why you might be rejected. Lenders turn down millions of applications every year. If you are one of the unlucky ones, you should try to find an explanation or at least some guidance.

For example, you may appear to be carrying too much debt from other sources or your credit report rang alarm bells, perhaps because you had missed some payments on a previous loan. It may simply be that you do not fit the lender’s profile for a particular loan.

There’s nothing to prevent you applying to another company. Different lenders may take a different view. But be careful how many applications for credit you make in the short term. If you allow a significant number of companies to search your credit report, this could damage your credit rating as it could be interpreted to mean that you are desperate for money or possibly that someone is trying to commit fraud.

It is always sensible to check your credit report before making any further applications. That way, you can be sure that the information in it is up to date and correctly reflects your circumstances.

Your credit report has worried the lender.

UK lenders check with either Equifax or Experian to find out your credit details. This unique, personal record of your credit history could show that you already have a number of loans and the lender may be worried that you will not be able to repay another. Be careful, however, as the same information may not show on both. If there are any errors knowledge will be power as you will then be able to correct them.

Click here for a copy of your credit report from Equifax.

Click here for a copy of your credit report from the online Experian service CreditExpert.

You will also find advice that will help you to improve your report.

You may not fit the lender's profile.

For example, a credit card issuer may only give cards to people who already have fewer than three, or a mortgage lender may specialise in first-time buyers.

You are a non-standard credit risk.

According to Datamonitor, the independent market analyst, more than one in five adults in the UK are deemed non-standard. They may include the self-employed, others who cannot provide sufficient proof of income and people who have an outstanding county court judgment (CCJ) against them or have had their homes repossessed for non-payment of mortgage.

You move around.

Credit companies look for stability - for example, living at the same address for at least three years or having a long-term relationship with the same bank. So, if you move around a lot or switch banks often, this may count against you.

Your credit score wasn't high enough.

Lenders generally base their decisions on a credit score, which they calculate using the information in your credit report and your application. Every lender has a different formula which can even vary from one type of loan to another. This will not be exactly the same as the one generated by a lender, but it will give you a good idea of what they may think. If you have already checked with Equifax and Experian this may help you with further advice. Check my file...