Personal Finance

What Steps To Take If You Have Been Refused A Financial Product

A man sits at his office thoughtful about a refusal for a financial product

The UK Credit Score Guide 2018
Chapter Ten

Unfortunately, life doesn’t always go the way we plan. And never is this more true than when it comes to financial planning. Often we count on borrowing to realise our personal or professional ambitions. When a credit application is turned down, it can be both upsetting and frustrating. In this article, you’ll be able to read about:

  • Why credit might be refused
  • Find out why you were rejected
  • Checking your credit file
  • Re-evaluate your finances and pre-existing credit
  • Don’t make multiple credit applications
  • Doing your research on financial products beforehand

This article gives you valuable advice about what to do if your credit application is rejected by a financial institution. Before giving you some handy tips, let’s briefly look at some of the reasons why you might not get the green light.



Why might credit be refused?

In March 2017, BuddyLoans did some research and asked consumers why they thought they’d been turned down for a credit card or personal loan. Possible reasons for their rejection will be an eye-opener if you find yourself in the same position. What did they believe?

  • 73% previous history of missed payments
  • 58% multiple credit applications had left a footprint on their file
  • 40% poor credit history
  • 30% not registered on the electoral roll
  • 24% in rented accommodation
  • 21% history of short lets because in rented accommodation
  • 17% no credit history
  • 14% employment history showed lack of stability (such as zero hour contracts)
  • 13% change of name (which made it difficult to track previous credit history)
  • 10% financial association with former partner still on credit report
  • 8% having new baby (with changes in earnings)

What can we learn from common reasons for rejections?

You should bear in mind that would-be borrowers themselves are giving their opinion about why credit was refused. For this reason, they might have supplied more than one possible explanation.

A woman is considering her options for credit after having been refused a financial product

However, it might help you to understand why you were turned down and give you ideas about rectifying the situation so subsequent applications will be approved. Steps like registering for the electoral roll can be done online in a matter of minutes and require no special expertise. Now, let’s focus on the measures you should take after an unsuccessful credit application.

Find out why you were rejected

Good lending practices mean that financial institutions should tell you if your credit history has played a role in their refusal and which credit reference agency they consulted. If this is the case, your first step should be to obtain a copy of their data on you.

Checking your credit file

Ideally, you should have checked your credit report before you made an application for new lines of credit. However, if you didn’t, now is the time to do so. A statutory copy of your credit report costs £2 from each credit reference agency and you can apply online or by post by supplying your personal details.

A statutory copy of your credit report  costs £2 from a credit reference agency

Your credit report should arrive within 7 working days. Once you have a copy, go through it with a fine tooth-comb. Make sure that all the information about your credit history is correct and take up any inaccuracies either with the agency or by contacting the lender who put them on your file. Make sure that previous financial associates (such as ex-partners) aren’t linked to your credit file.

Check that all financial institutions have up-to-date information about you, especially your address. Inconsistencies about your address could raise a red flag through fraud scoring because of the risk of identity theft. Once your credit report is in order, what should your next step be?

Re-evaluate your finances and pre-existing credit

Don’t panic if you’ve been refused credit as you aren’t alone. The research by BuddyLoans found that 1 in 5 applications for a credit card or personal loan are turned down. Instead, think of your rejection as a wake-up call and use this as an opportunity to re-evaluate your financial decision-making. Think about how many debts you already have and your existing access to credit. Be brutally honest – what you lend yourself money based on the data on your credit report?

A man is listing his expenses and setting a budget so that lenders will be more willing to approve credit for him

If the answer’s a resounding ‘No!’, start getting your financial affairs in order. Put a budget in place and stick to it. For a period of 3-6 months, keep your spending to a minimum and concentrate on paying off some of your debts without borrowing more.

Such measures will improve your credit rating and make lenders more willing to approve your next credit application.

Don’t make multiple credit applications

The worst thing you can do when you’ve been turned down by a bank is to panic and start applying to other financial institutions in rapid succession thinking that one will approve you eventually.

Every time you apply for credit, the resulting credit search remains on your file for future lenders to see.

Every time you apply for credit, the resulting credit search remains on your file for future lenders to see. Too many credit applications in a short period of time can be a warning sign for would-be lenders and have a disastrous impact on your credit rating as you seem desperate. Instead, wait at least a couple of months before re-applying. Apart from checking your credit file, how can you improve the likelihood of being approved credit?

Do your research on financial products beforehand

Every financial institution has an idea of their ‘ideal’ borrower and you might not not fit this profile. This has nothing to do with how good your credit score is but concerns their lending criteria. Before applying for another financial product, do your homework. Find out the restrictions they impose. For example, there might be a minimum age or salary for a certain loan or credit card.



You could also make use of eligibility tools on the websites of most debt advisory services. Not only can it tell you if you meet the lender’s requirements but they might be able to recommend financial products from other institutions which are more suitable for your circumstances.

What to keep in mind if you’ve been refused a financial product

Being turned down for a financial product might be a blow but it isn’t the end of the world. Use the rejection as the chance to check your credit report and analyse your money management skills and spending habits. Give it some time and research the market for the product you want. Such simple steps can improve your chances of making a successful application next time.


Interested In This Article?

Go to article introduction and table of contents

About the author

Thomas Henderson

Thomas worked as a consultant in personal finance in the UK for 18 years. He has found a passion in sharing his experience on familymoney.co.uk

Thomas also takes pleasure in woodworking, reading and observing stock market trends.

Add Comment

Click here to post a comment

About The Author

Thomas Henderson

Thomas worked as a consultant in personal finance in the UK for 18 years. He has found a passion in sharing his experience on familymoney.co.uk

Thomas also takes pleasure in woodworking, reading and observing stock market trends.

Jump To A Category

Quick Read: Money Magazine