Once you have a better understanding of why your application was rejected, there are a few steps you can take to improve your chances of securing the money you need in the future. We have put together four top tips that you should consider when hoping to improve your chances of securing a loan:
Fixing mistakes in your credit history
If you have been rejected for a loan based on your credit file, you should be given the name of the credit reference agency that provided the lender with access to your credit history. You can then approach that agency to ask for a copy of your file. Sometimes there are mistakes in credit files so if you do think something isn’t right, get in touch and ask for this to be corrected. Lenders won’t always agree to the changes you have requested. However, if you still feel there is a mistake, you can attach a note, known as a Notice of Correction, to explain why the item in question isn’t an accurate representation of your spending behaviour. If you are not sure whether your history is correct or not, speak to a financial advisor who can help you dig deeper into your credit record.
Don’t rush into a new application
Try to avoid applying for several loans in a short space of time, particularly if you are applying to many different lenders. Every time you apply for a loan – whether you are successful or not – your application will appear in your credit history as some lenders issue a hard credit search when you apply. If your file shows that you have made several applications in a short space of time, lenders may be concerned that you are struggling financially and, therefore, unable to repay any loans. This can further damage your credit rating and may reduce your chances of succeeding with your next application.
Build your credit rating
If you believe your credit rating could be the reason that you can’t get a loan, there are several steps you can take to build your credit rating. Typically, borrowers often begin by tackling unpaid debts, closing any unused accounts, avoiding any missed account payments and demonstrating reliability by taking out an affordable credit card. However, if you’re unsure what method would be best for you or you feel you need to build your credit rating quickly, it might be a good time for you to talk to an independent financial advisor. Several organisations provide free, impartial advice that could help you get on top of your finances and even add to your savings so you can enjoy a more stable financial future.
Consider whether a loan is right for you
You should also consider whether a loan is really necessary. There are some things in life you can’t bargain for, such as a broken boiler or a car breakdown. But expenses, such as house extensions or upgrading electronics, are often unnecessary costs that can be postponed if you are struggling to get the loan you need. If you can, consider spending a few months putting spare cash aside to cover the costs instead, or perhaps approach a friend or family member who would be willing to lend you what you need temporarily.
Ask yourself some important questions before applying for a loan
Before deciding to submit a loan application, try asking yourself the following questions:
- Why do I need to borrow money?
- How much do I need to borrow?
- Can the expense wait until I have increased my savings?
- Could a friend or relative help?
- If I borrow money, will I be able to afford the repayments?
If you feel you may struggle to repay a loan or believe the expense can wait, you may feel more comfortable approaching someone you know to borrow money or simply boosting your savings ahead of making a purchase. However, if none of these options are right and you are sure you can consistently afford the repayments, borrowing money could still be the right solution for you.