Where to go if you've been refused credit

If you've been turned down for a credit card or loan there are steps you can take to find out why. There are also things you should avoid doing which could stop you getting MoneyFit for future credit.

Check out the other borrowing options to consider, or avoid below. But don't forget that you can get grants or loans for essential household goods or other emergencies from The Royal British Legion's Immediate Needs Grants Scheme, or some of the many Service charities available – see Other Service Organisations on the Legion's website.

What you should be told if you have been refused credit or a loan

If you're turned down for a loan or credit card as a result of a search on your credit reference file, the credit card or loan company should tell you this and let you know which credit reference agency they used. 

You can then approach the credit reference agency to ask for a copy of your file.

You can also ask the lender why they refused you - and what information they based this on - but they don't have to give you a detailed explanation.

If you do spot a mistake in your credit file, write to the credit reference agency and ask for them to correct it.  

Make sure you explain why it's wrong, and include any evidence you have. 

The agency has 28 days to act. The relevant detail in your credit report will be marked as 'disputed' while they investigate it.

Don't keep applying

If you have been refused a loan or turned down for a credit card, think very carefully before applying for more credit. Any credit applications you make – successful or not – will show up on your credit file.

Several applications in a short space of time may make lenders think you are desperate for cash. This may damage your credit rating further. Your credit rating affects whether you can get credit, how much you can borrow and. It can also affect the interest rate you may be charged.

What to do next

What to do next depends on why you are looking for credit.

If you need to borrow to pay off other debts

If you're looking to borrow in order to pay off other debts or to help you pay bills and living expenses at the end of the month then it’s worth talking to a free debt adviser as soon as you can. They will be able to help you come up with a plan and avoid getting deeper into debt – see Where to get help if you are in debt

If you're looking to fund a purchase and can afford the repayments

If you're looking for credit to fund a purchase, such as buying a car, and you can afford the credit or loan repayments, then check your credit rating. You do this by getting hold of your credit report – this is crucial in influencing the lender’s decision about whether to give you credit or not.

Contact one or more credit reference agencies to ask for a copy of your report - see How to check your credit report

Bad credit reports - Before you look to borrow elsewhere

If you've been turned down for a loan or card it could be a good opportunity for you to think about your current money situation.

If you already have debts you're struggling to repay, you should talk to someone about them. There are a number of organisations that offer free, confidential debt advice – see Where to get help if you're in debt.

If you have paid off your debts, you should think about trying to save some money if you can to build up an emergency savings fund – see Budgeting to make the most of your money. Use our Budget planner to get started.

Alternative borrowing options if you have a poor credit rating

If you need to borrow some money and you can afford the repayments, there are other options beyond credit cards and personal loans.

Credit unions

Credit unions are non-profit organisations set up to help people in their local communities or who share a common bond - for example, because they work for the same employer.

There's a cap on the amount of interest they can charge on their loans of 3% a month or 42.6% a year APR (the cap in Northern Ireland is 1% a month). 

There are no hidden charges or penalties if you repay the loan early. With most credit unions, you have to save for a period before you're allowed to borrow – see Credit union borrowing

Since October 2015 three credit unions have changed their eligibility criteria to allow members of the Armed Forces to join. You can save directly into one of these from your payroll - see the JoiningForces website.

Budgeting loans from the Social Fund

If you desperately need to borrow money, you may be able to apply for an interest-free Budgeting Loan from the Social Fund. Alternatively, other help may be available from your local authority in England, or the Scottish and Welsh governments.

Lenders of last resort

Think carefully before borrowing using payday loans, doorstep lenders or by using a pawnbroker. And avoid illegal loan sharks altogether. See our video of how Micky got caught up with payday loans which spiralled out of control and ruined his military career.

  • Payday loans - Taking out a payday loan can be a very expensive way to borrow. It’s also all too easy to roll over your loans from month to month and lender to lender, leading to your initial debt quickly growing into an unmanageable one.
  • Home credit or doorstep lending –  is when a company lends you money and collects repayments weekly or fortnightly at your home. It can be very expensive so think very carefully before you take on this type of loan. Don't borrow from anyone who calls at your house uninvited offering you a loan as this is illegal.
  • Pawnbrokers - will lend you money but at fairly high rates of interest and you'll have to leave something valuable, normally jewellery, as security. The item is known as a 'pawn'. If you can't pay back your debt, you'll lose your item. For extra peace of mind, check that your pawnbroker is a member of the National Pawnbrokers Association, a trade body that promotes high standards of business conduct.  See Pawnbrokers on the Money Advice Service's website for more information.
  • Loan sharks – are illegal lenders who often target low income and desperate families with small, short-term loans. They may seem friendly at first but borrowing from them is never a good idea. Avoid them at all costs. They will often charge extortionate rates of interest and you may be harassed if you get behind with your repayments. Check whether they are authorised by the Financial Conduct Authority (FCA). If not, don't touch them - report them to the local Stop Loan Sharks team.  Find out more in Dealing with loan sharks.
  • Cash for gold - If you want to sell old gold there are several different options to choose from including postal gold sites, specialist gold merchants, TV gold websites and traditional pawnbrokers. Think very carefully if you are considering selling gold to get hold of cash. 

Rebuilding your credit rating

There are steps you can take to rebuild your credit rating after being in debt – see How to improve your credit rating.

Last reviewed: 21/01/2019

This content has been provided by the Money Advice Service