It can be a stressful time when you’re refused credit, especially if you’re desperate for cash and on the brink of a financial emergency.
Here is a brief guide on what to do – and what not to do – when you have been refused a loan.
Don’t apply for more credit
If you have been turned down for a loan, it can be tempting to make multiple applications elsewhere, especially if you are in urgent need.
However, this is one of the worst things you can do. Remember that all credit applications, regardless of whether they are successful, will show up on your credit file. Multiple applications in a short space of time can set alarm bells ringing where lenders are concerned.
Talk to a debt advisor
If you need to borrow money in order to pay off other debts or to cover the cost of bills and living expenses, it may be best to talk to a free debt advisor. This way, you can come up with a personal plan and avoid getting deeper into debt.
How to improve your chances next time
Check your credit rating by getting hold of your credit report. Your credit score is a crucial part of the decision making process on the lender’s part and late repayments or court judgements can lead a lender to believe you are unlikely to repay future credit on time.
Take the necessary steps to improve your credit rating, such as using credit-builder cards. Make sure you’re on the electoral roll, close old accounts, cancel out of date credit cards and use any credit you already have sensibly – by making repayments on time.
You should also make sure that no one else’s poor credit score is dragging yours down. Lenders scour the credit history of you and your spouse, or anyone with whom you have a joint bank account or loan. If you no longer have a financial association with this person, make sure you get this credit link broken.
However, sometimes bringing finances together in a partnership or marriage can be beneficial. For example, since a combined credit score can be stronger than that of an individual, this may help your case when applying for joint loans.
When these are repaid quickly, these loans can be a useful option in times of need.