In this guide we take a look at why you might have failed a credit check. At the end of this guide is a link taking you to Credit Expert where you can view your credit report to investigate further.
Your credit rating is important if you would like to take out credit, for example a mortgage or personal loan. Every day a lot of credit applications are rejected. Because of this, customers are often puzzled as to why they have failed the credit check.
Making an Application for Credit
Whenever you make an application for credit, the chances are that a credit check will be performed with one or more of the three credit reference agencies in the UK. So for example if you are applying for a loan or credit card, a credit check will be performed as part your application.
Other factors are also taken into consideration beyond just obtaining your past credit history. For example the information you provide on the application form and the lenders own internal risk calculations will all play a part. Different lenders will have different internal risk calculations so you might score better with one lender than you would with another.
Reasons why you have failed a credit check
You don’t have a history of paying back credit
Lenders like to see a history of accounts repaid on time. If you haven’t had credit before, or have only had little credit this could cause your application to be declined. It seems odd that you need credit to get credit but it’s true. In this case you could consider applying for something like a Store Card or a Capital One Credit Card as these are easier to obtain and will help build up your credit rating.
You have missed payments in the past
Missing payments does have an affect on your credit score. Lenders like to see on time payments and so will view any missed payments in a negative light. To help avoid missing payments in the future consider setting up a direct debit.
You don’t match the lenders profile
As mentioned at the beginning of this guide, a lender will have their own internal lending policies. Where one lender may decline your application for credit, another could welcome you with open arms. However if you apply to many different lenders in a short space of time this can look bad as it can be seen as an indicator of financial trouble.
You like to move around a lot
Stability is another thing lenders like to see. If you constantly move house then this can have a negative affect on your credit score. Living at the same address for a reasonable length of time is viewed as better than being at an address for only a short amount of time.
Your partner has a bad credit rating and you have a joint account
When you have a joint account, such as a bank account, an financial association is created. If your partner or the person you hold the joint account with has bad credit, this can also affect your own applications, even if your own individual credit score is good.
You have spent up to the limit on your existing credit
One of the checks carried out when you apply for credit is the affordability check. If for example, all your credit cards are near their limit, this could also been seen as a sign you are struggling financial and cause your application to be declined. In this case it is best to start paying down your existing debt before adding any more.
You have late payments
If you are late making a payment towards your loan for example, the fact this has happened is recorded on your credit report. This can affect the score you get when you make an application for credit. As mentioned above setting up a direct debit can help keep you on track.
You already have too much credit
If you already owe a lot of money then your application may be declined based on affordability. This can also happen when you have unused credit cards with large credit limits. The reason for this is that you could spend all of your available credit then be financially over committed.
Bad Credit and Adverse Credit
This is an obvious one but is worth a mention. If you have defaulted on any of your accounts or you have been declared bankrupt then this will have a massive effect on any applications you make for credit. With these types of information recorded, you will struggle to find anyone willing to lend to you. The few lenders that will lend to you will charge you a large amount of interest because you are considered a much greater risk.
If you have been declined because of bad credit but you are not sure why, it is worth getting a copy of your credit report so you can investigate what the cause is.
You have made a lot of applications in a short space of time
If you have made a large number of credit applications in a short space of time then this can cause your credit check to fail. Whilst the outcome of these searches are not recorded, having a large number of applications for credit on your credit file can be seen as a sign that you are struggling financially, and will put lenders off.
You are not on the Electoral Roll
When you make an application for credit, as part of this process a check is made to see if you are on the Electoral Roll at your current address. Not being on the Electoral Roll can cause your application to fail. You can add yourself onto the Electoral Roll by visiting the AboutMyVote website.