Whether you are applying for a mortgage, a credit card or a loan, being declined credit application is frustrating.
So what should you do if your credit application comes back marked "declined"?
Hold off making a new application
You may want to respond to one lender's rejection by taking your business elsewhere and applying for credit with someone else.
Making several applications at once until someone accepts you can be extremely damaging to your future prospects for securing credit.
This is because any application for credit will appear on your credit record, and several made in quick succession says to any prospective lender that you are having difficulty in securing credit. As such, they may then be reluctant to lend to you.
So hold off making any new credit applications for now until you have gone through the following steps.
Find out why you were rejected
If your mortgage application was declined it may be because of previously being refused credit, defaulted payments, or County Court Judgements (CCJs).
Credit card or loan companies could refuse you based on your credit record, but there are other reasons too. The only way to find out for sure is to ask.
Under the rules of the Banking Code all mortgage lenders are required to provide a primary reason for a mortgage application being rejected
Credit card and loan providers too must make it clear why they have rejected a credit application if you ask
As such, the first thing you should do is contact the lender who rejected you by telephone call or letter. Politely ask why they rejected you, and you should be provided with at least the primary reason promptly.
Check your credit report
If you were rejected because of your credit history and you think this is unjustified, it is a good idea to get a copy of your credit report from one of the credit agencies:
Your credit report shows you exactly what the lender would have seen too, and it may be immediately obvious to you then why you were declined, such as a past financial association you have never got round to untangling or some payments you defaulted on years ago when you were less financially savvy.
You may even spot anomalies like a credit card opened in your name that you do not recognise, in which case it is possible to erase these incorrect entries by contacting the company in question.
It is also possible that you have become the victim of fraud if you spot anything unfamiliar on your report; if so, it is crucial to contact your bank immediately.
Improve your credit score
Improving your credit score will help with any applications you need to make for credit in the future, including:
Mortgages
Credit cards
Loans
Removing a financial association or deleting an entry that does not belong there can be an effective quick-fix for your credit report.
Otherwise there are various other ways to improve your rating over time, but the best thing to do is to show you can handle the credit you do already have by using it carefully and making the required payments on time.
If you applied for a credit card, one extremely useful way to improve your credit rating considerably is to go instead for a "credit building credit card" or "bad credit credit card".
These are specifically designed for those with poor credit and can actively improve your rating as you use them.
By using them and paying them off in full on a regular basis you can demonstrate your ability to handle credit and thereby improve your credit score. Read our guide for full details on how these work.
Make a new application
You should always wait a few months after making one credit application before making another one. This will ensure your credit score does not suffer from repeat applications.
When you do come to make an application again, make sure you can find no reason why you might be rejected:
Carefully check that you meet the application criteria such as the required income, your age and where you live
Shop around for the kind of lender who is likely to accept a borrower in your circumstances, whether you want a mortgage, credit card or loan
