It isn’t pleasant being turned down for a loan or other form of credit. Embarrassment, shame, bewilderment… these may be some of the feelings you experience when you get rejected after applying.
Rebuilding your credit rating back to a point where mainstream lenders will be willing to offer you excellent rates again will take some time. There are no quick fixes when it comes to rebuilding an impaired record back to an excellent one.
There are, however, several things that you can do immediately to get yourself back on the road to having a healthy rating:
The temptation when you’ve been refused a loan or credit card is to simply apply for another one in the hope that a different lender will be prepared to approve you. But this is mistake and can make your rating worse than it was when you got that first refusal. If you make any credit application – for a loan, a mortgage, a credit card or an overdraft – the lender will immediately perform a credit search on you and this will be recorded on your credit record held by one or more of the credit reference agencies.
Banks and other financial institutions don’t mind a few credit searches on your file, particularly if they are spread out over several months. But a large number of searches over a short period of time is generally taken as a red flag that the applicant is experiencing financial difficulties. So don’t damage your credit rating further because even if it is simply impaired rather than poor, a large number of searches may mean that even lenders prepared to offer you credit will more than likely charge you a higher interest rate.
Examine your credit reports
You may not know why your application has been turned down because you have genuinely kept up with all your repayments and never been in default with a lender. But there is obviously something amiss with your credit rating and sitting around wondering about it is not going to get you anywhere.
The three main credit reference agencies – Experian, Equifax and CallCredit – will all supply you with a copy of your credit report for a small fee. You can find how to apply for it by visiting their websites. They usually charge £2 for this or you can take out a subscription where you can view it online and also receive email alerts whenever there’s been a search on your file or an attempt by somebody else to obtain credit in your name. Once you receive your report, you should be able to see the problem fairly easily. Experian has an excellent guide on how to read it and what to look for here.
It’s very likely that if you are not on the electoral roll, this will have been the reason for your credit application being declined. This will be obvious from your credit report and is very easy to fix. The government’s web services portal has an easy form to fill in online to get on the electoral roll here.
You may have been refused because of a mistake on your report. If you do spot a genuine mistake, there are steps you can take. Challenge the agency by complaining and they will have 28 days to remove the wrong information or tell you why they don’t agree. During this period, the information will be marked as ‘disputed’ and lenders will have to ignore it if you apply for credit.
If you spot something that is accurate but is out of date because your circumstances have changed, you can ask the agency to append a statement to the report which explains why your financial situation has changed. This is called a ‘notice of correction’.
Think about getting some advice
Getting refused for credit may be disheartening but it can also be a wake-up call. A refused application is a sign that all is not well in your financial world and that it’s time for a long, hard look at your accounts. It may be that you already have significant debts that you are struggling to meet the repayments on or perhaps you have maxed out your credit cards because you’re buying too many things that you simply cannot afford.
If you are struggling with debt, you should consider getting some advice on how to stabilise things. There are plenty of organisations who can offer you advice. The Money Advice Service has a list here.
Check out the alternatives
If you really do need to borrow some money (and not for unneccessary luxury items), there are alternatives to the mainstream lenders that offer financial products other than personal loans and credit cards:
- Credit unions – These community-based, mutual organisations are able to lend money at more affordable rates than many of the lenders who specialise in bad credit loans. Because they are not-for-profit groups, credit unions direct lending to people living and working in the areas that they are based in. But they will generally only lend to you when you have been saving with them for a specific period of time.
- Sub-prime lending – A growing number of lenders offer loans and other forms of credit to people with less-than-perfect credit ratings. The interest rates will be higher than you’ll find on the high street, but if you need to borrow a smaller amount and can afford the repayments, then there are plenty of alternatives if you’ve been turned down by your bank.
- Payday loans – There for emergencies, payday loans should be treated with caution. You’ll need to be certain that you can repay the loan and the interest on the day in the loan agreement or you could face significant interest payments and penalties.
Article provided by www.solution-loans.co.uk, a technology-led finance broker aiming to provide customers with the most suitable type of credit through offering expert advice alongside a broad range of financial products.