It’s the ultimate financial nightmare situation: you’ve applied for a loan, and perhaps several, but the only answer you’re getting is “no”. And now, you’re worrying not just about the financial issue that might have led you to apply for short term loans in the first place, but also your apparent inability to convince lenders that they should extend credit to you.
High-interest rates on bad credit loans can lead to significant financial strain if not managed responsibly.
For those who seek out loans, there are often alternative options, such as investing in a 0% credit card, borrowing from family and friends, and/or trying to have their bank overdraft extended.
But let’s presume you’ve exhausted such obvious “alternatives” as the above. What are the next steps you should be taking after that latest loan application rejection?
First of all… find out why lenders are turning you down (if you can)
As a general rule, lenders don’t give unsuccessful applicants information on why their application did not result in credit being granted. However, you should be able to get the lender to inform you of the credit reference agency (CRA) they used when assessing your application. Asking that CRA for your free credit report may then give you some clues as to the potential reasons you were turned down.
It's important to understand that repeatedly applying for credit and taking out loans, especially with bad credit, can increase financial risk and further impact your credit score. As a credit broker authorized and regulated by the Financial Conduct Authority, CashCompare is committed to responsible lending practices.
There is a wide range of reasons why loan applications can be rejected, such as the applicant having a poor or limited credit history, the applicant’s employment not being regarded as a secure and reliable source of income, and/or the applicant having provided incorrect information on their application.
Naturally, the exact reasons for your loan application refusal will largely dictate what you do next. If, for instance, it was simply a poor credit history that was largely or entirely to blame for the outcome, you should be very careful about rushing to make further applications, which could drive your credit score down still further.
Instead, you might look at list of direct lenders in UK that specialize in making available loans for bad credit , such as several of the lenders that are represented in our panel at Cash Compare.
Work to improve your credit score, instead of applying straight away for another loan
Multiple loan applications in a short space of time can have the effect of damaging your credit score, given the impression it can give that you aren’t entirely in control of your finances.
So, rushing to make another application with another lender, without having made any changes since the last application refusal, might be a rather unwise idea. Instead, at this stage, you should be looking at what things you can do to help bolster your credit score for next time.
Some of those steps – such as registering on the electoral roll, and making sure the information on your credit report is correct, requesting changes if it isn’t – may be relatively “quick wins”. Others, though – such as reviewing all your existing debts, and making decisions on how to ideally pay off those before you submit any further loan applications – will take much longer to “feed through” in terms of positive impact.