Having your loan rejected can be disheartening, especially if you don’t know why your application was refused. However, it’s important to remember that a rejected loan application isn’t the end.
While it’s natural to want to know the reason you were refused a loan, a rejection also provides an opportunity to reassess your financial health.
There are multiple factors that can play a role in the lender’s final decision. Most commonly, loan applications are often rejected when the applicant doesn’t match the lender’s requirement criteria. For example, an applicant may appear too high risk to lend to based on past financial history or loan affordability. Each lender has their own set of criteria, so if you’ve been rejected by one lender, there’s still a chance you may be accepted by a different one.
Instead of getting hung up on the reason behind your rejected loan application, focus on how you can increase your chances of success for next time you apply.
In this article, we’ll explore some simple changes that you can implement to improve your chances of loan approval when you apply for your next loan.
1) Don’t Apply Again Right Away
If you find your loan rejected, carefully consider whether applying for another loan right away is the right decision. When you apply for a loan, most lenders will conduct a hard credit check on your financial situation, leaving a mark on your credit score.
If you apply for multiple loans within a short period, it can result in multiple hard searches on your credit file, and cause your credit score to drop. Having too many applications may also make it seem like you’re in desperate need of money and make lenders more reluctant to approve your application.
If you’ve been rejected for a personal loan, try to wait at least six months before you apply for credit again. This includes car finance, credit cards, and even a new mobile phone contract.
However, if you do find yourself in need of support right away, Salad Money may be able to help. With no hard credit score checks, we use Open Banking technology to assess your loan affordability fairly and offer the support you need.
2) Check Your Credit Report for Errors
Having mistakes on your credit report, such as incorrect or outdated information, may lead to lenders being unable to verify your identity and might get your loan rejected. That’s why, before you apply for another loan, evaluate your credit file for any mistakes. Even a small typo could have consequences.
If you spot any mistakes, fix them by contacting the lender or relevant credit reference agency. Ensure you explain what the issue is and provide them with sufficient evidence to support your dispute. For example, a letter from the lender confirming you’ve paid off a debt.
By ensuring your credit report is error-free, you can reduce the risk of a rejected loan application, as lenders will have more information to base their decision on.
3) Register to Vote at Your Address
Signing up to the electoral roll assures lenders that you are who you say you are, and helps them verify your name and address. As an additional benefit, doing this can also boost your credit score.
Registering to vote shows lenders that there’s a fixed address where they can contact you, which may increase your chances of your loan application being accepted.
If you move home or change your name, use the government website to register to vote at your new address or with your new name as soon as you can. By registering to vote at your current address, you can reduce the risk of having your loan rejected.
4) Improve How You’re Managing Your Existing Credit
If you’ve had your loan rejected recently, one of the best things you can do is re-evaluate how you’re managing your existing credit.
Many lenders review your credit file when they process your application, so improving the way you manage your credit can significantly increase your chances of being accepted in the future.
Before applying for a new loan, if you can, take some time to build up your credit score. Having a good credit score will not only improve your chances of loan approval but might also help you get a better interest rate.
5) Consider Putting Bills in Your Name
Having a strong history of paying bills on time (such as rent or utilities) demonstrates financial responsibility to lenders. This can put you in a more favourable position to help you bounce back from having your loan rejected unexpectedly.
Setting up direct debits is one way you can make it easier to remember to pay on time and build up your credit score.
However, ensure you always have enough money in your account to cover your direct debits. If a direct debit bounces, it could end up damaging your credit score and lead to late fees.
Choose Salad Money for Fair and Affordable Personal Loans
If you’ve ever had a loan rejected, it’s only reasonable to want to find out why. Getting in touch with your lender, reviewing your application, and examining your credit file are all helpful steps you can take to understand what went wrong.
However, what’s more important is understanding what you can do to improve your chances of loan approval the second time around.
At Salad Money, we prioritise your financial health. That’s why we offer fair and affordable personal loans to help you overcome financial challenges and meet financial obligations.
As a prominent lender in the UK, we offer access to the financial support you need to navigate financial emergencies and get your finances back on track.
Our ‘More Than Your Score’ loans are designed to provide you with the funds you need, regardless of your credit score. Using a unique Open Banking-based assessment to analyse your loan affordability, we support you in getting the loan you deserve.
What’s more, we’re an FCA-regulated and authorised organisation, so you can trust us to keep your financial data safe.
To learn more about our personal loans, click here and to read more blogs like this one, visit our blog page now.
