Have you been rejected for loans? Are you worrying how to rebuild your credit status? This guide will offer you tips on what to do next.
Why am I being rejected?
There is no such thing as a credit ‘blacklist’ so don’t worry. The current economic climate has meant that lenders are far less likely to award credit but that doesn’t mean there aren’t options available.
What can I do next?
If you have been rejected for credit do not continue to apply. Firstly, check your credit report (from Equifax, CallCredit or Experian) and check there are no payment defaults. The problem is that if you continue to apply and are subsequently rejected for a loan within a short amount of time, your credit rating will be badly affected. As well as checking your credit report, it may be worth using a pre-application checklist, which will test your eligibility for the loan before it is applied for. This way you can determine whether the credit was rejected as a result of poor rating, or due to one off lender specific reasons.
Can I use a card to rebuild my credit rating?
You may wish to transfer the credit you already have onto a lower interest or interest free card using a balance transfer. This will lower your repayments to allow you to pay off the card faster by chipping at the loan, rather than the interest.
Using a pre-application eligibility checker will allow you to gauge your chances of obtaining the credit without the lenders seeing your application. This will have no impact on your ‘creditworthiness’ and so will reduce your chances of being rejected in the future.
If the pre-application eligibility checker shows that the only cards you will be able to apply for come with massive interest rates, it may be wise to evaluate whether or not you really do need to borrow. There may be budgeting tools you can use to better manage your finances, or if you are still struggling there are free debt advice services available to help you.
How can I rebuild my credit rating once I have been accepted?
If you have been accepted for another credit card this can actually help to rebuild your score providing that the card is paid off in full, every month. Even if you do not need the card, its wise to spend a little on it each month then repay the amount fully. This will prove to future lenders that you are a worthy candidate for credit because you can manage your finances sufficiently well to repay debt in full every month. Be careful though, because often specialised ‘credit rebuilding’ cards come with high interest rates, which isn’t a problem if they are paid off in full, but can put you in a worse situation if it is not repaid.
The best tip with lending is to only borrow what you can afford to pay back. Although it is tempting to request the highest level of credit available to you, by borrowing and repaying a lesser amount, your bad credit will become a thing of the past.