What to do if your loan or credit application is refused?

Having a loan application turned down can feel confusing, disheartening, and worrying, especially when you urgently need to borrow money to cover an emergency expense.

Why was my loan application turned down?

There are several reasons your loan application could have been turned down.

1. You didn’t meet the lender’s eligibility criteria
   Every lender has its own eligibility criteria, and you must make sure you meet this before you apply. Lenders will not consider applications from anyone who doesn’t meet their criteria.


2. You weren’t able to provide all the information needed
   When you apply for a loan, you’ll need to provide certain information, such as your address history and income. You may also be asked to send the lender copies of your payslips or benefits statement. If you’re unable to provide the required information, the lender will refuse your application.


3. You have a bad credit history
   If your credit history shows that you have previously defaulted on credit commitments, this could affect the lender’s decision.


4. You have no credit history available
   If you’ve never paid bills in your name or borrowed credit, you could have low or no credit history. Without evidence of how you’ve managed credit, lenders have no basis on which to assess the level of risk involved in lending to you.


5. Your current financial situation suggests that you might not be able to afford to repay the money you’re applying to borrow
   When considering your application, the lender needs to be certain that you’ll be able to afford to pay back the money you’re applying to borrow.
   If your current financial situation suggests that the loan you’d like to take out is not affordable to you, they will turn down your application.
   This is done to protect you; the last thing a lender wants is to put you at risk of falling into debt.


6. You’ve made multiple credit applications in a short space of time
   Making multiple applications for credit in a short space of time could harm your credit score if you undergo a hard credit check each time.

How you could increase your chances of being considered for a loan

1. Carefully check the lender’s eligibility criteria
   Make sure you check the lender’s eligibility criteria before you apply. While you’ll typically need to be a UK resident over the age of 18 to apply for a loan, lenders could have other eligibility requirements. Look out for things such as an upper age limit, a minimum monthly income, or a certain number of years of UK address history.


2. Gather any documents before you apply
   Before you apply for a loan, it may be a good idea to gather any documents you may need to send. You’ll usually be asked to provide photo ID, such as your passport or driving licence, as well as proof of your address and income.


3. Know your credit score
   Knowing your credit score and understanding how it could affect the loans available to you could help you find a suitable lender. For example, if you have a history of bad credit, you may choose to search for a lender that specialises in loans for people with bad credit.


4. Work on your credit score
   The good news is that no matter how bad your credit score is, it’s never too late to work towards a healthier position.
   Building credit takes time and dedication, but there are several things you can do to get started today.
   If you’re not registered at your current address, signing up to the electoral roll could have a positive effect on your credit score.
   Make sure your bills and any other credit commitments are paid on time each month.


5. Use a credit broker
   Using a credit broker, such as Little Loans, to search for a loan could protect your credit score from multiple hard searches. Little Loans uses soft search technology to search for a suitable loan for you with no impact on your credit score.* Rather than you potentially having to make multiple applications with direct lenders to find a loan that could be a good match for you, Little Loans does the work for you.

Search for a short-term loan with Little Loans

Little Loans is a credit broker authorised and regulated by the Financial Conduct Authority (FCA). We work with a large panel of over 30 trusted and responsible direct lenders.

With Little Loans, you could search for a short-term, personal loan between £100 and £10,000. Depending on the amount of money you apply to borrow, you could repay your loan over a term between 3 and 60 months.

The Little Loans eligibility criteria

You could search for a loan with Little Loans if you:

• Are over the age of 18;
• Are a UK resident;
• Have a UK bank account with a valid debit card; and
• Have a regular source of income paid into your bank account.

My loan application was rejected; could I get a loan without a credit check?

In the UK, in line with FCA guidelines, it is not possible to obtain a loan without a full credit check, known as a creditworthiness assessment. A creditworthiness assessment will include a hard search or an Open Banking check.

Again, it’s important to remember that you could still get a loan if you have bad credit.
Some lenders, including several on the Little Loans panel, specialise in loans for people with bad credit.
If you’re worried about your credit history, it’s also worth noting that some lenders use an Open Banking check as part of their application process. Open Banking looks at your recent financial activity, and if your finances have recently improved, this could help your application.

I need a loan, but keep getting declined; what can I do?

If you’ve made multiple loan applications and have been turned down each time, you might want to take a step back and refer to the ‘How to increase your chances of being considered for a loan’ section above.
In the meantime, there could be other options to consider.

• Borrow money from a loved one
  Could a family member or friend lend you the money you need?
  Borrowing from someone you know could be risky if repayment expectations are not met, so it’s important to prioritise paying back what you owe just as you would with a professional lender.


• Save up
  Saving up won’t be an option in every situation, but if your expense could wait a few months, it’s worth noting that using your own funds rather than applying for credit will save you money in the long run, as you won’t need to pay interest.


• Do you claim benefits?
  If you’ve been getting certain benefits for a minimum of 6 months, you could be eligible for a Budgeting Loan. The amount of money you’re able to borrow will depend on your circumstances. Your repayments will be taken from your benefit payments, and you will not be charged interest on a Budgeting Loan.

Who can I talk to about money worries?

The following charities and organisations offer free, impartial financial advice: StepChange, MoneyHelper, Citizens Advice, and National Debtline.

If you’ve been approved for a loan but are finding it hard to make your repayments, it’s important to reach out to your lender as soon as you can. We understand that this may feel scary, but the sooner your lender is aware of your situation, the sooner they can help. They will talk to you about any steps that could be taken to reduce some of the pressure you’re facing.

*Little Loans uses soft search technology, which will not affect your credit score. If you’re matched with a loan and you choose to make a full application with the direct lender, they will complete a creditworthiness assessment, which will involve a hard search or an Open Banking check. A hard search will be visible on your credit file for up to 12 months, and multiple hard searches in a short period of time could harm your credit score.