Aug 03

Why have I been refused credit?

Being refused credit can ruin your dreams of a new house or car or even a new business.

However, being refused credit is not the end of the story. You can change things.

There are a number of reasons you might have been turned down – and finding out what they are could get you back on track.

Here are some of the more common reasons you have been refused a loan, plus your journey to a better credit score.


Low credit score means you’re refused credit

Poor credit report

Whenever you apply for credit, the company you apply to will normally give you a credit score based on information in your credit report, your application form and any details they have if you’re already a customer. This could include whether you are up to date with payments, whether you’ve applied for, or received, credit with another lender quite recently, your income, and what products you have with them (if any).

Here are some typical factors that might reduce your credit score:

  • Too many applications for credit, in a short space of time, may look like you’re relying too much on credit to get by. Use our eligibility tool to make sure you only apply to a lender who will accept you.
  • Too much credit – you may have a large loan and have maxed out your credit cards. Lenders will worry about you making additional payments
  • County court judgements and individual voluntary arrangements (IVAs) – these show you’ve struggled to manage your finances in the past.

It pays to understand what your credit score is before you apply, as this can give you a good idea of whether you’ll be accepted or not. By keeping your credit report in the best order possible, you can improve your credit score.


Lender’s decision to not give you the money

Failed stamp on credit application

Even if you find out what your credit score is and take steps to improve it, the lender is the one who decides whether to accept or refuse your application based on their own guidelines.

  • One company might approve you credit with a score of 800 while another might refuse it on the same score.
  • If you’ve been refused, only the lender can tell you why because only they know how they use your credit score (see below). If you ask, they may give you the reason for refusal, although they are under no obligation to do so. It’s worth a try anyway.
  • Knowing the reason is useful because it might give you a plan of action to put things right, such as registering on the electoral roll or providing additional evidence to support your application.


Other factors that could mean you’re refused credit

Businessman peering though a magnifying glass

Lenders don’t just look at your credit report, they also look at other factors such as

  • Low income – you may only be accepted if you’re earning a certain amount of money
  • Time in job – lenders may prefer that you’ve been in your job for a certain time, as it’s  more likely that you will keep making payments.

It’s worth checking any guidance the lender provides before you apply, so you can maximise your chances of being accepted.


mistakes on your loan application form

Loan application form

Finally, you may be turned down because you’ve failed to provide accurate information on your application form.

It’s surprisingly easy to make a mistake when filling out an application form.

Don’t rush it – take your time to fill it out carefully, and don’t guess at answers such as how long you’ve lived in a property.

Supplying the wrong information can lead to delays or make the lender refuse your application. Some lenders could even view it as fraud.

So once you’ve filled in an application, go back over it to make sure you haven’t made any mistakes.

If you have been turned down, but think you may have made a mistake on your application form, ask the lender if they’ll allow you to correct and resubmit it. Double-check whether this counts as the same application or a second application.

Being refused credit is not the end of the road. By speaking to the lender you may remedy the situation. Alternatively, it makes sense to check your credit report beforehand to see if there’s anything on there that could count against you, and do what you can to improve it.


your journey to a better credit score

Credit score app

Happily, although you might not be able to change a lender’s mind if you happen not to fit their criteria, at least your credit score is within your control.

Here are the top ways that you can get a better credit score according to HSBC:



  • Keep on moving. Easy to say, but if you can manage to stay in one place for at least six months – ideally a year – or more, you look like a more stable customer.
  • Be a late payer. Being late once or twice isn’t terrible but if you’re late every single month, that can tell against you.
  • Apply for more than one at a time. Lenders get worried if you look like you’re desperately seeking credit. Use our eligibility tool here to make sure that you only apply to lenders who will lend to you.
  • Max out. Lenders might think you’re overstretching yourself if you max out all your cards.
  • Draw cash from the card. The APR on withdrawing cash on credit cards (not debit cards) is horrendous. Doh’t do it!
  • Use credit repair companies. They’re a dodgy option. You can do your own repairs even if it takes 6-12 months.

HSBC infographic

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