Turned down for credit? What to do next

By Emma Lunn

If you applied for a credit card only to have the lender say "no thanks," it can be disappointing and frustrating. But it's important to find out why you were turned down -- and take steps to make sure it doesn't happen again.

First, contact the lender
Your first step should be to ask the lender what types of information it's using to determine your financial credibility.

Some lenders use a computerised system to parse your application and credit history and decide whether you're creditworthy -- but the lender should still be able to give you broad information about what the system has taken into account.

If the computer turned you down, you can ask the lender to take a closer look.

"If the decision was made solely using a computerised scoring system, you can ask the lender to look at your application again," says Paul Crayston, spokesman for the Money Advice Trust. "This review should be done manually and not using an automated system. You may have to supply extra information to support your application." credit-application-rejected

Investigate the problem
If the lender says you have been refused credit because of your credit history, ask the lender which credit reference agency it used; it will either be Experian, Equifax or Callcredit. 

Then pull your credit file from the correct agency. Each credit agency is required by law to provide your report for £2. You report will show your repayment history, your current accounts (and those closed within the past six years) electoral roll details and previous times your credit report was pulled. If any of that information is incorrect, contact the financial institution that's incorrectly reporting that information as well as the credit reference agency.

"If you don't get errors corrected you may find it harder to get credit. It's worth knowing that while mistakes are being investigated, lenders are not allowed to rely on disputed information when assessing your credit rating," says Nick Hill, a money expert at the Money Advice Service.

Make improvements
If it's not a mistake that's to blame, it's time to take a look at what you've done wrong when it comes to using credit-- and make improvements. Steps you could take might include always making debt repayments on time, staying well below your credit limit and being on the electoral roll (which lenders use to verify your identity).

Unfortunately, however, consumers have no automatic right to credit. So even if you take all the right steps to improve your credit, a lender can still say "no." And there are no guaranteed ways to change its mind.

Get strategic

If you have been turned down for a credit card or loan, it's a bad idea to keep applying for more credit. This is because any applications you make -- whether or not you're accepted -- will show up on your credit file. Numerous applications in a short span of time will make lenders think you are desperate for money.

If you keep getting rejected, there's a chance you're simply applying for the wrong credit card. If you have a poor credit rating, you're unlikely to be accepted for the best credit card deals and rewards. Instead, consider applying for a card aimed at people with a poor credit history. These "credit-building" cards can be heavy with fees but, used correctly, they can be a good way to improve your credit history.

Ultimately, however, constantly getting turned down for credit could be a sign that you shouldn't be borrowing money at all.

"It is important to consider other options for the purchases you want to make," Crayston, says. "Can you save for the item, perhaps by cutting back on expenditure elsewhere in your budget? Do you really need the item? Can you source the item for a more affordable price?"

See related: 5 payoff strategies for attacking your debt, How long slip-ups mar your credit report

Published: 4 June 2013