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Let’s dive straight into it! Here are the first three things you should do after being declined for a loan
We quite frequently look at how to qualify and apply for credit a lot. So this week we thought we’d look at the other side of the coin: if you’ve been refused a loan – what can you do?
Being refused a loan is indeed a frustrating situation. Whether you need money to get through an emergency or cover a unexpected expense, when the answer is no, it can leave you feeling a little helpless and unsure what to do next.
Here’s our best advice.
If you have been refused a loan – what can you do?
So here are our top three tips:
The answer to refused a loan – what can you do? can be boiled down to a three-stage process:
Stage #1: As we always say, is to keep your cool and think things through.
The moment you see or hear “Sorry, we can’t offer you…”, it’s tempting to send off another application to more lenders that might be able to help you out. However, take a moment to breathe and think. As a rule of thumb, people only apply for lots of credit in a short amount of time in two situations: they’re already in financial hot water, or they’re anticipating money troubles in the near future. If a lender sees that you have been applying for lots of credit within a short space of time, they’ll assume this is the case, which will act as a red flag that stops you being approved for the loan. The whole thing can snowball, too. The first rejection stops you being approved for the second application, which stops you being approved for the third, etc… Instead, stop and consider all of your options before you send another application.
Stage #2: think about why you were turned down.
When you’re refused credit, the lender might be able to tell you why you were turned down. (Note: the lenders don’t have to do this.)
If your lender can’t tell you, it’s time to play Sherlock Holmes. First, check your credit score — we break down how to do that for free in this article– and check that the loans you’re considering are a good match for your credit score.If your credit score is a better score than you thought: you might be applying for a loan that’s not right for you. If your credit score isn’t quite as healthy as you hoped: you might be better off applying for a bad credit loan to repair your credit score.
Also, think about checking your credit file for any mistakes.
A survey last year showed around 10 million adults in the UK found errors on their credit files. These errors have had a knock-on effect on their ability to get mobile phone contracts, credit cards, personal loans and even finance for their houses.
In fact, more than 20% of those who have checked their records have found errors. However, the real number could be even higher because of how few people actually check their reports!
On the other hand, if you’ve got problems with your income or borrowing history, your next steps should be to look for alternative sources of credit.
Quick side note: An error on your credit file meant that you were refused a loan – what can you do?
If you think there is a mistake on your credit file, you should first get in touch with the provider or creditor responsible for the error. For example, if your file says you missed a payment that you definitely didn’t miss, you should call that company. Make sure you have evidence, too — receipts, payment slips, etc…If there has been an error, they’re legally obliged to update their records within 30 days. This update will then go to the credit agency and be wiped from your file.
But what if they dispute the error?
In that case, you need to speak to the Credit Reference Agency you got your file from. They’ll then take a look at your file and investigate the error. If they conclude it was a mistake, they’ll remove it from your file, which will repair your credit score a little. You should also do the same with the other credit reference agencies too.
Stage three: Choosing your next approach
If you’ve learned that you applied for a loan that wasn’t right for you, it’s just a matter of applying for a loan that is right for you. Be careful, though. Make sure you do a soft search eligibility check before you apply!
If you were refused a loan because of a poor credit score, then it might be a good idea to consider a guarantor loan. With a guarantor (a friend or family member that helps you get better rates by guaranteeing your repayments), you’re far more likely to be accepted for a loan.
If you were refused a loan because of affordability reasons, we recommend talking to a debt advisor to get in-depth advice on your next steps. You don’t want to end up in a worse situation by making a bad move.
If you’re struggling with debt or are having money problems, don’t hesitate to seek help and advice. There’s lots of great advice on the Money Advice Service site, or you can contact Step Change for practical solutions.
- Author The Bamboo Team
- Posted 6 June 2019