Being turned down for credit is inconvenient and worrying, especially if you don't know why it's happened. Find out why your application might have been rejected by the bank and what you can do about it.
If you've applied for a credit card or loan only to have your application declined it's a good idea to try and work out why so that you can rectify any issues as soon as possible.
It's worth doing this before rushing to apply for another product or you could get into a 'rejection spiral' and start to do serious damage to your credit rating.
You could find that it's a combination of different reasons, or that there is no clear explanation as to why your application has been refused but it's a good idea to work through the list below so you get an idea either way.
One of the main reasons lenders reject credit applications is because they don't like something they find on your credit report.
This can be down to the way you've managed credit in the past, if you have missed repayments or defaulted on outstanding debts for example.
However, aside from having a 'poor credit history' in the traditional sense, there are a number of other reasons why your credit report could stop you getting the approved for the financial product you need.
Your credit report should accurately reflect your financial circumstances and recent track record when it comes to managing your finances but unfortunately mistakes can occur.
Any errors or discrepancies could make a big difference when lenders decide if you should be accepted or rejected for credit.
For example, a loan you have paid could still be showing as unsettled, or a marker could have been inadvertently placed on your credit report by a company in error.
Financial products you've never applied for could be listed on your report, either down to bank error or fraudulent activity, and these will impact the success of your credit applications until they're rectified.
Even seemingly innocuous factors such as your address details not being up to date or addresses that you've never lived at or financial associations you've never had can influence your application.
As a result it makes sense to check your credit report before you make any application, to ensure all information listed is accurate and up to date.
If you do find something that shouldn't be there then you can query it through the credit report agency or contact the company directly to ask them to update the record.
You can also add a short note to your credit report to explain or clarify why negative issues have arisen. There is usually no charge for this service and you can do it by contacting the credit reference agency directly so is worthwhile considering.
If you make several different credit applications in a short period of time these will each leave a search footprint on your credit report even if you decide not to take out the financial product or are rejected for it.
This can give lenders the impression that you are struggling to cope with your existing financial commitments and are desperate to get access to as much credit as possible and increase the chance that your credit application will be declined.
As well as applications for financial products mobile phone contracts, digital TV subscriptions as well as hire purchases and other buy now pay later store incentives can also be listed so it can be quite easy to build up a high number of applications in a short time period without realising.
If this is the case then your best course of action is to wait a while (ideally 3 months if possible) before applying for a credit again, as if you apply elsewhere and are turned down again the extra searches could further damage your chance of getting approved in the future.
Read our guide: How Many Credit Applications is Too Many? for more information.
If you have not kept your personal details - like your address or your name (if you get married for instance) - up to date with your existing lenders then there is a chance that contradicting information listed on your credit report could cause your application to be declined.
To find out if this is the case you will need to check your credit report and contact any lenders or utility companies to ask them to update their records if anything is not as it should be.
You should also ensure that you are registered on the electoral role to vote at your current address as this will help reassure lenders of your identity. If you need to update your registered address, you should visit the Your vote matters website.
Lenders can be reluctant to offer credit to borrowers without any previous borrowing experience as they have no way of knowing whether you are a reliable person to lend to.
So if you have never borrowed before it's possible that you were rejected because you haven't built up a strong enough history of managing credit to be accepted.
Once you can show that you make repayments on time and won't exceed your limits lenders become more willing to accept your application.
For some financial products lenders will specifically state that you need a minimum number of years' experience of managing credit (i.e. credit cards, loans, mortgage or an overdraft) to be eligible, if you don't have the necessary experience then your application will be rejected.
If you're new to credit you can start to build a credit history by using a credit building credit card. Read our guide: Why Your Credit Record Matters and How To Improve It to find out more.
You can also read our guide: What your Credit Report really tells Lenders for more information on exactly what your credit report contains and how lenders use it to assess your application for credit.
Even if you have an impeccable credit history and have managed your previous accounts without any problems if you have a significant amount of credit already available to you when compared to your ability to repay it's possible that your application will get turned down.
This figure isn't the same as your total debts but is instead your total potential debts if you maxed out your existing credit facilities. By declining your application the lender is protecting themselves against potential default if you decided to draw all of your available credit at once.
If you already have several credit accounts which you are no longer using you may want to consider closing them to reduce your access to credit before applying for a new account.
While you may have a strong history of managing your finances without issue, you may find that your association with others can cause your applications to be turned down.
This is because joint credit accounts create a link between your credit profiles so lenders may check your friend or partner's credit report as well as your own when making their decision.
This means that if someone you have a financial association with has a poor credit history you may be treated as a greater risk and therefore be more likely to be rejected.
If you have a joint account the financial association will stay on your report until the accounts are closed and a note of disassociation is placed on your report.
Read our guide Is it Wise to Mix My Finances With My Partner's to find out more.
Applications for credit can be turned down due to small mistakes on the application.
These could be simple things from missing a zero off your stated annual salary, to ticking the wrong box on the application form and accidentally informing the lender that you have children when you don't, or declaring you're currently bankrupt.
If you've been declined and have a copy of your application then check through it carefully to make sure that you haven't made any mistakes that could have counted against you.
If you don't have a copy of your application then you may be able to request it from the lender, although you may have to wait a short period or pay a small administration charge in which case you'll need to decide whether it's worth paying for.
If you haven't been as accurate as possible with details of your current financial situation on your application then this may have caused your application to be rejected.
If you failed to divulge details of existing debts then the lender may take this to be an attempt to hide them and refuse your application.
For this reason you need to take extra care that all the details on future applications are correct before you submit them.
The majority of financial products place some restrictions on who can get them. These often relate to an applicant's minimum income, age and history of managing credit.
If you have applied for credit and been turned down then it makes sense to double check that you fulfil all the application criteria of the product you've applied for.
Some lenders place restrictions on whether products are available to existing customers or not. This is worth checking too as if you already hold a credit card with a lender for example, they may be unwilling to offer you another.
There is little point in applying for products that you don't stand a chance of getting, especially as the added search enquiries on your credit report will do you no favours. Instead, you need to check the application criteria carefully to make sure you fulfil it before you apply.
If you've already applied only to find that you did fall outside their desired application criteria then you'll know why you've been rejected and are free to look elsewhere for a similar product with a more flexible application criterion should you wish to at a later date.
Even if you manage your money effectively, never miss a payment and have little outstanding debt you may still be turned down for credit.
This can be simply because the company don't feel that you are likely to be a profitable customer so see little benefit in accepting your application.
Many lenders have an 'ideal customer' in mind for each financial product, usually someone who can afford to repay each month but will need to spread the repayment and incur interest charges in the process.
While the application criteria can give you some idea of the sort of customer a lender is looking for, if you don't fulfil their 'ideal customer' criteria unfortunately there's little you can do about it.
Ultimately whether the lender decides to accept your application is entirely their decision.
If you feel that none of the above reasons adequately explain why your application has been rejected by the lender then the easiest way to find out exactly what's happened is to ask them directly.
Lenders are often willing to give you an explanation if they decide to reject their application, although members of staff in branch or on the phone may not be privy to a detailed explanation.
Therefore, a good way to find out why you were turned down is to contact the lender in writing so that you have a record of your request and that they have time to check the details of your application and write a response.