Reasons why you might be refused credit

Below we list some of the reasons you may be refused credit.

Credit refused due to identity theft

You could be refused a loan because your credit file shows that you haven't kept up the repayments on a loan you didn't even know about. This can happen if someone's stolen your identity and applied for loans or credit cards in your name. See If you're a victim of identity theft for more information on how to deal with this situation.

You haven't registered to vote

A lender will often use the local electoral register to see that you are who you say you are, and live where you say you live. If you haven't registered this information, the lender will not be able to verify that you live at your address. The solution is to register to vote, and ensure that your electoral information is fully up to date before seeking credit.

If you aren't eligible to vote in the UK for any elections (some foreign nationals can vote in local elections) then you should send the 3 main credit agencies proof of your residency (i.e. bank statement or utility bills along with ID) and ask them to update their systems.

Difficulties in the past

In the past your finances might have been difficult and you might have missed payments. The record of your previous arrears can stay on your credit report for up to 36 months. If a court judgment was made against you, the evidence stays on your credit rating for 6 years. Bankruptcy also stays on your record for at least 6 years. A bankruptcy restriction order can stay on your record for 15 years. This may convince lenders that you may not honour your obligations. If this is the case, the solution is to add an explanation to your credit report setting out the circumstances that caused adverse information to be added to your account. You can use a notice of correction to do this. See How to improve your credit rating for more information.

You don't fit the lender's profile

There is no single credit score since different lenders use different methods of working out a client's credit worthiness. Additionally, the method of working out the client's suitability may vary from product to product. For some organisations you may not fit into the specific group of people they target. Make sure you do research into the organisation you are requesting credit from, and try and identify whether you would be a suitable customer.

Too many searches on your credit report

Each time you apply for credit, you are giving the lender permission to search your credit report. When they search your report, it leaves a record of the check that other lenders can see. If there are a large number of searches on your credit report, this can give the wrong impression to a lender who may decide that you are desperate for money or overextended. Make sure that lenders do not get the wrong impression when you express an interest in their products. Explain that you just want details or a quote, and that you haven't started applying yet. If you are making an online enquiry, make sure that only a 'soft' check will be performed. A 'soft check' is still visible on your credit file but it does not affect your credit rating as may be the case when a 'hard check' is done. You may have searches on your report that shouldn't be there. If this is the case, contact the lender who made the search, and explain that you were just looking for information and ask them to amend the report.

You haven't borrowed enough

Lenders rely on the details in your credit report to show them that you can make repayments and that you are trustworthy and reliable. If you have not borrowed before, you will have no credit history, and therefore no track record for the lender to judge your creditworthiness on. Ensure that the lender is aware of this and that they have full information about your situation.