It can be galling when you make an unsuccessful credit application, though it’s worth remembering that being refused for credit is not, in itself, hazardous for your credit rating. While your credit report will show that you applied for a credit card (a credit-application footprint will appear on your report for one year), it will not show the outcome of that application.
The consequence for many people though is that credit refusal can often lead to more attempts to get credit – and making multiple applications in a short space of time could have a serious impact on your creditworthiness.
To help give yourself the best chance of getting approved next time around, one thing to do is to take the opportunity to review your credit report before you next make an application for major credit (eg: a mortgage, or a loan). Your credit report is only one part of your application, as lenders also use the information provided on your application form, and information that they already hold on you (for example, if you’re applying through your bank).
It’s worth understanding why the lender in question turned you down. If you ask them directly, they should be able to tell you the main reason, and whether the information on your credit report played a part. Then you can take any opportunities to improve things before you finalise your mortgage.
Here are five ways your credit report could help:
1. Ensure that it is accurate, up-to-date, and reflects your present circumstances, as there may be some discrepancies on your credit report, such as different ways of listing your name and address, or errors such as duplicate listing of accounts or closed accounts marked as open. Should you find anything that isn’t right, then contact the relevant lenders to get it altered. Watch out too for unfamiliar or suspicious entries there that could indicate identity fraud, and financial associations which are no longer relevant.
2. You’d be able to spot if you’d missed some payments on cards or loans you have. Missed or late payments stay on your credit report for at least six years, though you can explain any missed payments by adding a “notice of correction”, which is a statement of up to 200 words. Going forward, remember to stay within the agreed credit limits and always make your repayments on time.
3. If you have made a lot of credit applications in a short space of time, lenders could believe that you’re in financial difficulties, or even see it as a sign of fraud. Each new application will probably result in the lender checking your credit report and leaving a credit application search footprint. Too many of these can cause alarm, whether or not you were approved, even though it isn’t actually shown on your report. So space out your credit applications and try to avoid making several applications close together.
4. The Experian Credit Score is a guide to help you understand your credit report, and how past credit management can impact on future credit applications and for you to monitor your progress as you get your finances in order before you apply. Lenders are generally interested to see longstanding accounts as it’s a good indicator of stability.
5. Your credit report shows Electoral Roll data. This helps to prove your home address and that you are who you say you are, so if you aren’t registered to vote at your current address, then it’s a good idea to do so.