What To Do If Credit Is Refused

by - Last Updated on September 24, 2018

If you're applying for anything from a mobile phone contract to a mortgage, then chances are that you're going to undergo a credit check. Unfortunately, not everyone passes that credit check. Failing a credit check doesn't have to be the end of the world though. If you've recently been refused credit, then here's what you need to do.

Why a Credit Check?

We'll start at the very beginning of the story. Why did you need to undergo a credit check in the first place? Any time money lending is part of a contract, the company that you're doing business with (whether that's your mobile phone operator or a used car dealer or anyone in between) has the right to request a credit check. This means that the company gets to look at your credit history.

There are three main companies in the UK that keep credit reports on consumers: Experian, Callcredit, and Equifax. These companies keep track of how much debt you have, which credit cards you hold, whether or not you miss bill or mortgage payments if there are any legal proceedings that affect your finances, and all kinds of other things. Based on this information, a credit report shows whether or not you're a good or bad risk. Companies check your credit report to see if it's safe to lend money to you.

But Why Have I Been Refused?

There are a number of underlying reasons why your credit request has been refused, but essentially it's because the company thinks that you're not a good credit risk. They think that if they lend you money (or in the case of a mobile operator give you a phone that you'll then pay for in instalments), that there's a good chance they won't get their money back.

Possibly this is because you really are an unsafe risk, you haven't proven that you're able to reliably pay back debts. Maybe this is because you already have too much debt. Perhaps there has been some kind of fraud committed in your name (which isn't your fault). Regardless of the reason, there is a certain process that you need to go through if credit has been refused.

Step One: Stop. Wait.

The absolute first thing that you need to do is to stop and wait. Do NOT apply for any more credit (no new credit cards, no applications to other mobile operators). Until your problem has been solved the chances are that any further applications are also going to be denied, and this will lower your credit rating even further. So put everything else on hold until you get to the bottom of what's going on!

Step Two: Get a Copy of Your Credit Report

Next, you need to get a copy of your credit report to find out what exactly is going on here. You can get a free copy of your report with any of the major credit bureaus. It's a good idea to get reports from all three companies if possible since reports don't always match up! In order to get your report, just click on the links below:

Step Three: Find the Problem

Once you have your credit reports in hand, you'll want to examine them and find out what exactly the problem is. There are a few things that you should watch out for:

  • Real Bad Credit: Your credit report shows that you have missed payments, that you have a lot of debt, that there are legal proceedings affecting your credit (bankruptcy declarations, etc).
  • False Bad Credit: Your credit report reflects things that shouldn't be there, this is particularly true if your report is linked to an ex-spouse or a family member or parent. The items on the report are true, but they shouldn't be on YOUR report.
  • Fraud: Your credit report reflects things that shouldn't be there, credit cards you never applied for, etc. Essentially, you have been the victim of identity fraud, and someone else is using your name to apply for credit.
  • Missing Information: Your credit report is missing essential items of information. Perhaps your phone number or address is wrong, perhaps you're not signed on to the electoral roll, maybe your name is spelt incorrectly.

Once you've identified the problem, then you can work on fixing it! Obviously, the solution here will depend on what your problem is!

If You Have “Real Bad Credit”

If your credit report shows that you have bad credit and you know this to be true then don't panic. You need to improve your credit before again applying for credit. This isn't as difficult as it may sound, though it will probably take a few months before you're back in decent shape (depending on how bad your credit actually is).

Improving your credit is easiest by simply paying off all the bad debts that you have and then paying off your bills and credit cards on time every month. Unfortunately, this isn't possible for everyone. If you have serious debts, then there is help available to you in the form of a Debt Management Plan. If you feel that you can handle your debt, then you can find more information about improving your credit score here.

If You Have “False Bad Credit”

If someone else's charges are reflected in your credit report, especially in the case of ex-spouses, then you will need to contact the appropriate credit agency to get those charges removed. You will almost certainly need to prove that you do not have any connection to the transactions shown (a divorce certificate, for example). In order to dispute charges on your credit report you can contact the dispute resolution service of credit agencies at the following links:

If You Suspect Fraud

If you think that fraud has occurred, that someone has, for instance, been taking out credit cards in your name, then again, you'll need to report this to the appropriate credit agencies. Simply use the links in the paragraph above to do this.

Again, you will probably need to prove yourself. However, once this is done, the credit agency can then put a warning against your name with CIFAS (a fraud prevention service). This should mean that the fraudulent charges no longer count against you when applying for credit, but do be aware that companies may take longer to approve credit (since they'll need to contact CIFAS for a full report), or they may ask you for further information before approval.

If There is Missing Information

Missing or incorrect information is easily dealt with. Again, all you'll need to do is contact the appropriate credit agency to change what needs to be changed. Use any of the above links in order to do that. If you are not signed onto the electoral roll for the UK and you are eligible to vote, then signing up is simple and takes only a few minutes. You can sign up here, and your credit rating should improve (since being on the electoral roll is seen as evidence that you are who you say you are, therefore lowers lending risk).

Can I Do Anything BEFORE My Credit Improves?

If you don't want to wait for several months until your credit report has improved there are a couple of things that you can do:

  • Source money from elsewhere: A loan from family or friends perhaps.
  • Get a guarantor: Some companies will allow someone else with a better credit rating to act as a guarantor for your application.
  • Look at other options: Credit Unions often have less strict conditions for lending than banks, for example, and some mobile phone operators offer no credit check contracts or no credit check SIM only deals.

Having credit denied can be a blow, but it doesn't have to mean that you'll never be approved for credit again. With a little research and a little time, you can improve or fix your credit score, meaning that next to you apply you should get that all-important approval!