When you apply for a loan, credit card, overdraft, or any form of credit, the bank or company lending you the money, or line of credit, do some investigations to see if you are “credit worthy”. These investigations are typically called underwriting.

This underwriting process is to verify we are who we say we are, have the income to repay the money that we are asking to be given, and also look at are credit score and past payment history.

In most instances, a lender is going to do all this research in a matter of minutes, usually based on your credit score, and make a decision as to if they will grant you the money/loan you are requesting.

However, when we are denied a loan, we may not always know why we were rejected, but there are a few common reasons why a lender may reject a loan application.

No Credit

It is the age old question, how do you get credit if you have never had credit and cannot get started in the credit business.

Having no credit is a bit of a red flag to lenders, but not always the end of the borrowing world. You can do a few things, and one is to seek out a guarantor to sign on the loan with you.

Other ways are to only ask for a small loan, or low credit limit on a credit card.

There are high-risk lenders that will grant credit to someone with no or little credit history, but the interest rates can be very high. If you use these accounts properly, they are also a way to build a credit file.

You can also research being on the Rental Exchange.

Bad Credit History

One very good reason a lender may reject a loan is due to the borrower having bad credit. They may have defaulted on loans in the past, have CCJ’s/County Court Judgments, or possibly have gone Bankrupt.

Time can be a great healer of things, and credit is no exception. Everything drops off your credit history after six (6) years, but that means waiting 6 years, and then you are back to square one, no credit file.

Paying off old defaulted accounts and CCJ’s, and if need be going Bankrupt to get a fresh start, is a way to clear this up.


If you re over-extended, maxed out on credit cards, and owe a lot, a lender will see this on your credit file, and do a debt-to-income ratio, and may reject your loan application.

How do you remedy this, pay off or pay down what you already owe. Get a plan and budget in place to pay extra towards those you already owe.

Errors and Omissions

Your credit file should be reviewed on a regular basis for errors that may there, and also any omissions of accounts that should be on there.

You can contact the credit bureaus to have corrections made, and if you have a loan with a lender that does not report to a credit bureau, contact the lender to inquire.

You also want to be on the Electoral Roll, this is how lenders verify you and your address.

Also, insure any details you provided on your loan application are correct, and you have not made an error.

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