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What happens when you’re declined for lending

Getting declined by a lender, whether it’s for a loan, credit card, or mortgage can feel unnerving.

It can be useful to find out why your application has been declined, and what you can do to improve your prospects of borrowing money in the future.

What do lenders look at?

Lenders may look at a number of factors when deciding if they want to approve your application for finance, such as:

  • your credit reference agency (CRA) credit score

  • your eligibility for a product

  • any other credit agreements you already have in place

  • your electoral role information

  • any missed repayments

  • any county court judgements (CCJs), bankruptcies or debt solutions you may have (in the last 6 years)

Lenders will also complete a detailed creditworthiness (using credit scoring) and affordability assessment, when an application is received.

These assessments use a range of information, including:

  • information from the application form

  • internal data (if you have a banking relationship with the lender)

  • external information gathered from credit reference agencies

They may also take into account your current financial situation and anyone who is financially linked to you. 

Why do lenders decline credit applications?

There are a number of reasons a lender may decline your credit application. For example:

  • you may not fit the eligibility criteria

  • you may not have a substantial credit history

  • you may have missed payments on current or previous credit commitments

  • you may have a poor credit reference agency credit score

  • you may not have passed the minimum internal credit score that the lender requires (using credit scoring)

  • you may not have passed the affordability assessment

You may be given some indication as to why your application has been declined. This can help you see if you need to make improvements, or find a more suitable product. 

Even small mistakes on your credit application can affect whether you’ll be approved or declined for lending. Always check your credit application carefully. 

How does this affect you?

If your lending application has been declined, the lender may be able to take you through some of the reasons why and advise you on what to do next.

The reason why you’ve been declined for lending won’t be reported to the CRAs. However, a hard credit check will appear on your credit report – meaning other lenders will be able to see you applied for credit before. 

A hard credit check can stay on your credit report for around 12 months. A lender will always ask for your agreement to proceed before completing a hard credit check.

Multiple credit applications in a short space of time may signal to lenders that you’re in financial difficulty and in need of credit. This may affect your ability to be approved for credit.  

Depending on the lender, you may not be able to make another lending application for the product for a set period of time.  

Soft credit checks are recorded on your credit report, but aren’t visible to prospective lenders. A soft credit check is a top-level view of your finances. It shows what you may be eligible for when it comes to lending. 

How to increase your prospects of being approved by a lender

There are a few things you can do which may increase your prospects of being approved for credit in the future. 

Check your credit report

Checking your credit report can give you an insight into your borrowing history. You’ll also be able to check whether the information it contains is accurate. 

You can access your credit report through one (or all) of the CRAs.

Improve your credit score

There may be things you can do to improve your credit score. This can help increase the likelihood of being approved for credit in the future. 

Don’t keep applying for credit

Be cautious when agreeing to a hard credit search. Multiple hard credit searches in a short space of time could be seen as a sign of financial difficulty to a prospective lender.

Improve your finances

Look at ways you can improve your financial situation. You may want to try to clear any debts you currently have, or get an idea of your overall financial situation