If you’re looking into loans, you’ll probably know how important your credit rating is. It’s one of the main factors taken into account when assessing your suitability for a loan. But other factors are considered too, and it’s possible to be turned down for a loan despite having good credit.
You’re unlikely to repay the loan
Even if you’re paying off existing debts without any issues and think you can comfortably take out a loan, this might result in too much unsecured debt that you may not be able to repay. Lenders, such as Shawbrook Bank, have a range of “affordability indicators” which are used to determine someone’s ability to keep up repayments. They tend to look at someone’s disposable income, and if you will be able to meet repayments if your circ*mstances change.
Being seen as “likely” to repay a loan often isn’t enough. It’s possible to be turned down for a loan despite having good credit because the lender has established that you may not have the ability to repay.
You’re self-employed or have an irregular income
In 2023 there were 4.31 million self employed people in the UK. This number is growing, but many banks are still hesitant to lend to self-employed people due to changes in income. Lenders want to know that there won’t be any issues with loan repayments, which is why people with irregular incomes, or those who are self-employed may struggle to get approved, even if they have a history of paying debts on time.
If this applies to you, the best thing to do is keep detailed and accurate records. You’ll likely be asked to prove your income and outgoings for the past two years, along with evidence that your earnings have been declared to the HMRC. At Shawbrook Bank, we take personal circ*mstances into account when assessing your suitability for a loan, and can lend to the self-employed, but you should also consider shopping around to find a lender that suits you.
Your credit file contains inaccurate or incorrect information
Although uncommon, it’s possible to have a good credit rating but be turned down for a loan due to errors on your file. For example, if you received a County Court Judgement that was settled within the required time, it shouldn’t show up on your record – but there may be an administrative error in removing this. You may also find that there’s no electoral roll information on your credit file, even though you’re registered to vote at your current address.
If you’re considering applying for a loan, it’s worth proactively checking your credit file to ensure there aren’t any inaccuracies. If there are errors, you will need to dispute them. The easiest way to do this is to contact the organisation that registered the data and ask them to update this. Alternatively, you can get in touch with the credit reference agency (such as Experian, Equifax, or Callcredit) and raise a dispute with them. The Information Commissioner’s Office have detailed guidance on this if you’d like to find out more.
Although a good credit rating is an important factor in securing a loan, it is important to take into account other aspects that may affect your ability to obtain credit. Shawbrook offer a straightforwardpersonal loan application process, with a guaranteed rate upfront before you apply. We also take your personal circ*mstances into account when making a decision on your loan, and as we only do a “soft credit search”, there will be no impact on your credit score. This can help when you’re weighing up your options and looking for a loan that’s right for you.
FAQs
You're unlikely to repay the loan
Why am I not getting approved for a loan with good credit? ›
When a potential lender looks at your income and outgoings — which aren't shown to you on your credit score — they are likely to check them against your existing debt. If your outgoings are quite high while your incomings are lower than they'd like, it could look to them like you've bitten off more than you can chew.
Why is my credit score good but still rejected? ›
There are a few reasons your application might have been rejected, including: having a short credit history – it can take time to build a solid credit history. applying for too much credit in a short time – hard credit checks are recorded on your credit report, and having too many can negatively affect your application.
Why do I keep getting denied when I have good credit? ›
You may also have a history of high credit utilization. If you consistently max out your credit cards, for example, issuers may be hesitant to offer you new credit even if you always make your payments on time. Or maybe you've applied for too much new credit within a short time period.
Why do I keep getting denied for a loan? ›
Key Takeaways
Low income and an unstable employment history can also prevent you from getting approved for a personal loan. Failure to meet basic requirements like having a bank account can also hinder your chances of getting approved for a loan.
Can you have a 700 credit score and still get denied? ›
A good credit score doesn't guarantee your application will be accepted. It's commonly believed that a credit score over 700 will get you approved for credit. While it may be true that a higher score typically raises your chances of scoring a new loan or credit card with a lower interest rate, approval isn't guaranteed ...
Does a denied loan hurt credit? ›
The Bottom Line. Getting denied for a loan or credit card will not be recorded on your credit report, and it will not directly impact your credit scores. To improve the chances that you'll be approved for credit, you may want to take a look at your credit before you apply, and take steps to improve it if you need to.
Why am I struggling to get a loan? ›
These include: a history of missed payments or possible fraudulent activity on your file. the lender deciding you wouldn't be able to repay. not meeting a lender's specific terms and conditions, such as a minimum income level, or a mistake on your credit report – such as a typo in your address or other detail.
Does it hurt your credit score if you get denied? ›
A hard inquiry from a card application can cause a small, temporary drop in credit scores. A denial or approval won't hurt your credit scores, because decisions aren't reflected in credit reports. When making lending decisions, card issuers use credit reports and credit scores to determine creditworthiness.
Why have I been turned down for a loan? ›
Ask the lender if there's a particular reason you've been rejected. It may be that your credit score isn't high enough. It could be your income and expenditure don't meet the lender's affordability criteria. You can ask to see your credit report to check it's correct.
You may be denied a secured credit card for various reasons, including a lack of credit history, low credit score or no verifiable income. If you've been denied a secured credit card, working toward increasing your credit score can help improve your chances of approval if and when you decide to reapply.
Will Capital One approve me again? ›
Capital One Reconsideration
If your application for a Capital One credit card is denied, Capital One may give you a second chance through its reconsideration process. Reconsideration is an opportunity for you to make the case for why Capital One should accept your application.
Can you get denied a loan with an 800 credit score? ›
Lack of income is a major factor.
If the applicant's score is an 800 and the income does not cover the amount of monthly mortgage payment, there will be a rejection.
Why will no one give me a loan? ›
Lenders may decline a loan application if you have a poor credit score, don't have sufficient income, or don't meet their eligibility criteria, for example. If you've been declined for a loan, applying for another one straight away can damage your credit score and harm your ability to borrow in the future.
How to get a loan when everyone denies you? ›
Paying down debts, increasing your income, applying with a co-signer or co-borrower and looking for lenders that specialize in loans within your credit band could increase your approval odds.
How can I get a loan when no one will approve me? ›
Getting a personal loan with a co-signer that has a strong credit score and a solid income can boost your application. Your co-signer – ideally, a family member or close friend – will apply alongside you, and you'll both be responsible for repayment of the loan.
What should your credit score be to get approved for a loan? ›
Some may approve loans for scores as low as 580 or even 300, but scores above 640 often secure the best terms. Keep in mind that your credit score isn't a single number but varies based on different scoring models and lender calculations.
