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Why Can’t I Get Accepted For A Loan Or Credit? UK

By Kev TilleyCeMAP

Last Reviewed: 19th May 2022

Getting rejected for a loan can be discouraging, especially when you’re in urgent need of funds. There can be many reasons why this can happen, and it’s essential to understand why before making any other credit applications to avoid damaging your credit history.

While some lenders will tell you why your application was rejected, they don’t always have to, even when you ask. Let’s explore some common reasons why loans are denied and what you can do to get your next application approved.

A Poor Credit Rating

Nearly all licensed, reputable lenders will look into your credit as part of your loan application assessment. Your credit rating is essential in getting your loan approved since it tells the lender how you’ve handled credit in the past.

A low score is usually a red flag for many lenders, and it’s wise to check your credit score to see where you stand before applying for a loan. Sites like ClearScore or Experian allow you to check your credit score for free.

Although all bad credit is pooled into one, there can be varying levels of bad credit. You may have defaulted on a past loan, or you simply applied for too many loans in the past. Depending on the issue, you can find specialised lenders who help borrowers with a less-than-perfect credit history.

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Insufficient Income

Responsible lending requires that lenders only advance loans you can afford to pay back without getting into financial hardship. Such affordability is usually assessed by looking at your income and monthly expenditures. You’ll have little chance of approval if you apply for a large loan with a low or inconsistent income.

Ensure you only apply for loans you can afford to repay based on your income and outgoings. Work out the repayments for the amount you’re applying for to determine if they’re manageable based on your current income.

Non-existent Credit History

Even without a credit history, lenders will consider you a bad credit borrower. With a non-existent credit history, lenders have no way of knowing what kind of borrower you are. It’s often the case with young adults who are yet to build their credit history, or you recently moved to the UK and can’t transfer your credit history across borders.

Consistent bill payments or applying for a credit card can help you build your credit history. Some phone companies even report to credit reference agencies, and paying them on time can improve your credit score.

Outstanding Debts

If you currently have several outstanding debts or loans you’re repaying, it can be alarming to potential lenders, especially if you’ve maxed out your credit. It’s wise to put more effort into reducing your current debts before applying for a new loan.

Errors In Your Credit Report

Mistakes or errors in your credit reference file can lead to automatic rejections among some lenders. That’s why it’s essential to check your credit report and ask for a copy of your file if possible. If you spot any mistakes, you can write to the credit reference agency and ask them to correct them.

You may be required to provide enough evidence to support your case, and within 28 days, the issue on your report will be investigated.

Excessive Loan Applications

If you’ve been consistently making loan applications even while getting rejected, you’ve probably been damaging your credit without knowing. Recurrent applications look bad, regardless of whether it’s to the same lender or different ones.

Successful and unsuccessful applications register search markers on your credit file. You shouldn’t keep making applications once you’re rejected before remedying the causes. You can also restrict yourself to lenders who only conduct soft credit searches that don’t appear on your credit file.

Actions To Take If You Can’t Get A Loan

Improve Your Credit History

Your credit history is one of the most likely reasons you can’t get a loan. Improving your credit score before you apply for a loan can significantly improve your chances of approval. You can do this by:

  • Taking out small amounts you can quickly repay on your credit card and repaying on time without fail.
  • Register the electoral roll as a voter. It can help in your verification among credit reference agencies.
  • Have utility bills in your name, even if you’re sharing a house with others.
  • Set up direct debits for bills to ensure they’re always paid on time without delays.

Reduce Any Outstanding Debts

Try to reduce or pay off any existing debts before applying for a new loan. Existing debt is another common reason why borrowers can’t get a loan because lenders may not believe you can handle paying off too many debts at the same time. Consider how you can plan and budget better to pay off all your obligations or find alternative sources of income.

Find Alternative Sources Of Funds

Don’t make more applications once you’ve been rejected. Multiple applications damage your future credit chances, and it’s better to find an alternative source for the funds you need. Selling off old items, borrowing from a friend or family member, or starting a side hustle can provide an alternative avenue for cash flow.

Find Specialised Lenders

Nowadays, you can find lenders who specialise in helping all kinds of borrowers in the UK. Specialised lenders will consider your application and approve your request whether you have low income, bad credit, or no credit history.

Instead of concentrating on your credit history, such lenders focus on your affordability based on your income and expenditures. They provide personalised offers suitable to your circumstances to help you get the funds you need.

You’ll not find such lenders advertised and your best bet to access them is through brokers and advisers. They can help you find suitable lenders who will likely approve your request based on your circumstances, and this saves you both time and money.

The best part is that you get access to loans without worrying about your credit score, which will help improve your credit when you repay on time.

Provide Security

Having security involves providing a valuable asset used as collateral for the loan. With security, the risk to the lender is significantly reduced. If you fail to repay the loan, the lender can repossess the asset and sell it as a last resort to recover any outstanding balance.

The lender knows you’ll be motivated to repay to avoid losing your asset and will be more than willing to advance the loan regardless of your credit history. Assets you can use as security include your home, car, stocks, electronics and equipment or valuable jewellery.

Remember, you risk losing your assets when you default, so only borrow what you can afford to repay.

Incorporate A Guarantor

If you’ve found it challenging to get approved for a loan independently, a guarantor can help open the doors to borrowing for you. Having a guarantor involves incorporating a responsible person in your life in the loan application. It can be a trusted friend or family member with a good credit history and stable finances.

The guarantor agrees to repay the loan when you can’t, effectively ‘guaranteeing’ the loan and reducing the risk for the lender. With a guarantor, you can find better deals and terms than if you applied for the loan on your own. Since it’s such a big ask to a family member or friend, it’s vital you only borrow what you can afford to avoid getting them into trouble.

Why Can’t I Get A Loan? Final Thoughts

The lending world has made great leaps and bounds to provide all UK residents with access to financing despite their borrowing history.

Most online lenders are very flexible, and a lending broker or adviser can help you find a suitable solution based on your circumstances.

Give Loanable a call today on 01925 988 055 and they will provide you with the best deals available to meet your circumstances and consider any credit history you may have. With their expert advice, they can guide you through the process and give you the knowledge and confidence it takes to acquire a secured loan that is right for you.

If you have read all the information on secured loans carefully and feel that you want to proceed with a secure loan, get in touch with one of Loanable’s secured loan experts by emailing hello@loanable.co.uk who can work with you to find the best deal for your needs and circumstances.

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