Learning that your recent loan application has been rejected is pretty hard to take. It often means you have to return to the drawing board and is likely to change your plans in some way. However, it’s important not to get too downhearted, as it’s not the end of the world. With that in mind, let’s take a look at what you should do if a recent loan application that you made was rejected.
There’s no doubt that being rejected by a bank, building society, or loan provider can be demoralising. But it’s crucial not to panic. The worst course of action you can take is to start applying to every lender that you come across, as this will cause your credit score to take a big hit. In turn, this will negatively affect your long term chances of being approved for credit. We’d also encourage you not to apply for a payday loan. Although they’re readily available, payday loans are characterised by huge interest rates, often in excess of 1000%. Even if they get you out of a tight spot in the short term, they will probably leave you in a sticky financial situation going forward.
Look for other lenders
Before sitting down and firing off a new loan application, take the time to research the market and look for other lenders. After all, there are lots of reasons why your application might have been rejected by a bank or building society, and there are lots of other lenders to apply to. We’d also encourage you to use an eligibility calculator before submitting a new application. This protects your credit file and helps you identify potential avenues of credit that you can apply for.
Consider alternative forms of credit
It won’t surprise you to hear that there are multiple ways of borrowing money. So, if you’ve not had any luck when applying for a specific line of credit, consider an alternative approach with your next application. For instance, if a recent credit card application has been rejected by the bank, why not consider applying for a personal loan from a third-party lender like Koyo? The key is to realise that there are lots of options available to you, so don’t confine yourself to one form of credit over another.
Work on your credit score before re-applying
If you think that your credit application was rejected because of your credit history, you will need to work on your credit score before submitting another application. This is because most lenders rely on your credit score for their decision. There are several ways to improve your credit score, including:
- Register to vote.
- Make all of your regular payments on time.
- Check for errors on your credit score and correct them.
You should also check your credit score before submitting a new application so you know where you stand and what your likelihood of approval is.
The key thing to remember is not to panic if your credit application is rejected, as there are still plenty of options to consider. We’d recommend checking out an Open Banking lender, as they’re less likely to rely solely on your credit score when assessing your application, and they will take your current financial circumstances into account.