Whenever you apply for a loan, credit card or car finance the chances are that you will be credit checked. A credit check is used to assess whether you are likely to repay the credit extended to you and is used in combination with other factors you supply on the application form. As an example how long you have been employed.
In this post we take a look at 10 reasons why you might fail a credit check and provide further information on how you can check your credit report to see what yours looks like. Let’s get started then and see what can cause your application for credit to be declined.
1. Bad Credit
One of the most common reasons you might be declined is because you have a history of bad debt. For example, if you have defaulted on a credit card or loan then this information is recorded on your credit file.
Late payment markers can also be a problem and could cause your application to be declined as well. However some lenders known as subprime lenders will view this information slightly differently. For example Aqua Card may still give you a credit card whereas a high street bank would not.
2. You are not on the Electoral Roll
Not being on the electoral roll can cause your credit check to fail as well as it is used to check you are who you say you are. If you are not already on the electoral roll and would like to be, visit the gov website to get registered. It doesn’t take long and could help.
3. You have a lot of credit searches in a short space of time
If you have been applying for lots of credit you could find this doesn’t help your chances. It can be a sign of ID Theft or that you are desperate to obtain credit. If you keep on being declined the temptation is there to keep on trying and apply elsewhere. It is best to wait at least three months before trying again to avoid too many searches appearing on your credit report.
4. You already have too much credit
If you already have a lot of credit outstanding and this even includes unused balances on your credit card this could cause your application to be declined. Typically you might have failed because the lender thinks that you would be over committed if they provided you with more credit. Typically they will refer to this as affordability.
5. You don’t have any credit
Crazy as this sounds but you can sometimes be declined because you don’t have any credit on your file. Best thing to do in this case is to apply for credit that is easier to get such as a store card or the capital one classic card to help build your profile. So long as you use these cards sensibly and don’t get into debt you will start to improve your credit rating.
6. You frequently change your address
If you tend to move around a lot this can cause your credit check to fail. Lenders like to see stability in your life and being at the same address for some time can help improve your score. This of course all depends on the lender some might not be so bothered by it.
7. The Lender does not think you are a good match for their profile
Lenders all use their own internal policies to score your application. Whilst one lender my decline you another could happily accept you. However remember that making too many applications in a short space of time can be seen as negative thing so be careful before applying with alternate lenders.
8. Your partner has bad credit and you have a linked account
If you and your partner have a joint account for example then a financial association is created between you and your partner. This means that whilst you might have a good score, if your partner does not it could affect the applications you make for credit.
9. You have a few late payments
A few late or missed payments can affect your credit score and cause you to fail a credit check. This all depends on the lender in question though. Too many of these will look bad and will take some time to drop off your report. The best thing to do is to make sure you keep on top of your payments to avoid this information be marked on your report. The older this information is though, the less impact it has.
10. All your credit is maxed out
Similar to the affordability issue mentioned above, if you have lots of credit cards and you have spent up to the limits on them, this can have an affect on your credit score as well. Paying down that debt will have a positive impact on your score and should be your first point of call if you are trying to improve things.
Time is a Healer for your Credit Report
So there you have it, ten reasons why you might fail a credit check. Your credit rating improves over time if you manage your accounts well. Time is a great healer, if you have a poor credit score then keep on top of your debts and wait. After some time you credit rating will improve and you should be able to get credit again.
You can also check your credit report for Free with Credit Karma. Take a look at my Credit Karma review to find out more information.