Being turned down for a loan can be an unpleasant experience, especially if you are sure you have never missed a payment in the past or had any kind of ‘bad’ or adverse credit.
Even though you may have been declined it does not necessarily mean you will not be able to get a loan elsewhere but it may also be possible to reverse the decision.
Some lenders have very strict criteria for their automated decision making systems and if an individual does not fit the precise requirements the computer may return a negative response.
The way to possibly change this decision first requires an understanding of why this decision has been reached.
Even if you are certain you have good credit it may be worthwhile obtaining a copy of your credit report just to make sure nothing has been missed or overlooked that could cause a problem. The companies that provide credit reports also provide useful help and assistance for understanding what is on the report and what to do to put things right if there is a problem.
If your credit report does not show any reason why you could have been declined there are a number of other possible reasons. Lenders themselves may not actually tell you why you have been declined but may allow you to appeal and submit additional information that could help your case. It’s important to contact the lender as they may have a set procedure for appealing a decision and may also help you along the way.
Reasons for being refused a loan and possible ways to overcome them:
Many lenders require 3 years address history and some prefer you to have been at the same address for some time
Proofs of address can sometimes help and need to take the form of a utility bill or bank statement. Historical proofs of address dating back to help prove your past residential status can also help. This can be particularly useful for people that have recently moved.
Most lenders require applicants to be on the electoral role for the address on the application form. It sometimes takes time for electoral role data to be updated so people that have recently moved may not appear.
Proofs of address (as above) can help change a decision. In addition to this you can get written confirmation from a local authority to prove you have been entered onto the electoral role.
Work history can affect an application and many lenders like to know an applicant has good steady job history before granting a competitive rate loan.
If you have recently changed jobs a letter from your new employer confirming your employment details can help but may need to be accompanied by historical payslips from your previous employment. Changing jobs frequently may affect your ability to qualify for the best rates available.
Salary and disposable income
All loans will require the applicant to have sufficient income to afford the repayments and to afford a large loan a higher salary may be required or at least evidence that proves a reasonable income. Providing payslips can help and typically proof of the last three months income is required.
Some lenders prefer not to lend to self employed people but a large number of popular well known lenders will happily consider the self employed. More proof may be required to prove income and this can include the last years accounts with evidence of well managed finances and sometimes a future projection from an accountant.
If you have been turned down and you are sure you meet the criteria the lender requires to make a positive decision it is always worth contacting them to find out if it is possible to appeal the decision and how to go about it.
Applying to lots of different companies and being repeatedly turned down can potentially damage a credit rating so if a decision can be overturned simply by supplying additional information it could prevent more difficulty in the future.