Why you've been rejected for a loan and how to make sure you aren't next time
Getting rejected for a loan can be a frustrating experience. Thankfully, there are some proven ways to help increase your odds of getting approved.

When applying for a loan, many people think that it all hinges on a credit rating and that a poor credit history is the reason behind loan rejections. However, although your credit rating is a big factor lenders consider when processing your loan application, it's not the only thing they take into account. Let's explore other reasons that might lead to your loan being rejected and what you can do to remedy the situation.

Thankfully, there are also some new lenders, like Fintern, that look at the whole picture rather than just a credit score. To find out more, click here.
1. You Have a Thin Credit File
Now, although this relates to your credit score, it's not the same as having bad credit. While a low credit score may be due to missed bill payments or credit card repayments (amongst other things), a thin credit file essentially means you have very little information on your credit report. This may be because you've just moved to the UK or just entered the workforce. Little or no information makes it difficult for you to prove your dependability and for a lender to calculate a credit score.

So what can you do about it? Well, the good news is that, because you're starting with a blank canvas, you can build your credit score up! Getting a credit card (and using it wisely) is a great way to start building your credit rating.

Often, a thin credit score is the reason behind graduates being rejected for loans. If this is the situation you're in, check out our advice on building a credit score as a graduate.
2. You're Already Borrowing Money
You've checked your credit score and are feeling confident! Yet, your loan application is met with a rejection. Could it be because you already have another loan or credit card?

As well as looking at your credit history, lenders assess your current financial situation to make sure you can afford loan repayments on top of your other expenses. If you already have money going out to another lender (even if you're well within your credit limits), the lender you've applied to may be concerned that you will struggle to make their repayments on top of your other commitments.
3. Your Personal Details Are Incorrect (Or There's Missing Information)
It might seem like a small point, but typos and incorrect details could be the difference between a loan acceptance and rejection! If the information on your application doesn't directly match your credit file, the lender may flag your application as fraudulent. If this happens, they may ask you to provide extra proof of identity or flat-out reject you.

Fortunately, this issue should be an easy fix. Before reapplying after a rejection, ensure every detail on your credit file is up to date and error-free — address, full name, etc. Then, when you apply for a loan again, be extra careful filling the form out.

It's also worth noting that it could negatively impact your credit score if you apply immediately after a rejection. So if incorrect details are the culprit, explain the situation to the lender first.
4. You Have An Unstable Employment History
Lenders like to see that you have a steady and reliable income. Job changes and freelance work from multiple employers can disrupt your income calculations. It's best to wait until you've been in your new job for at least 60 days before making a loan application.

If you are self-employed or do seasonal work, it doesn't necessarily mean your loan application will be rejected. However, be prepared to show past tax returns to prove your income and show consistency.
5. Your Income Doesn't Meet the Lender's Minimum Requirements
As well as a stable employment history, lenders like to see you earn enough to repay the money you borrow. If your income isn't high enough to reach the lender's threshold, you could be denied.

If you have a low employment income, don't worry. You may just need to highlight any money you have coming in from other sources — for example, investments, child support payments, or side jobs.

It could also be worth applying for a lower loan amount so the lender feels confident that you can make the repayments.
How To Get Accepted For a Loan
As you can see, there are a number of reasons a lender might not accept your loan application. Most of the time, these can be easily fixed, and you can re-apply at a later date. But how do you make sure your loan application is accepted the first time round?

  • Check your credit report before making any applications - you can check your score for free (without affecting it) through Experian, ClearScore or Credit Karma. If it needs building, work on that first. Also double-check that all your personal details are correct and up to date.

  • Make sure you have proof of income - before applying, gather any documents you may need to prove your affordability.

  • Only apply for loans you can afford - there's no point applying to borrow a high amount if it will be impossible to pay it back. Review your income and expenditure and apply for a realistic amount.
Or try a lender that does things differently, like Fintern
With a Fintern loan, you can borrow £1,000 to £7,500 for up to three years at a low interest rate (Representative 18.8% APR (variable)). We also believe that a loan application shouldn't hinge on your credit history. That's why we look at your bank transaction data (using open banking tools) to get a holistic view of your financial situation and assess your affordability.

We also offer low-interest personal loans geared specifically towards graduates. Our graduate loans are based on your future earnings rather than past transactions and are perfect if you've just graduated, or are about to, and have a confirmed job offer.

Whether you're looking for a graduate loan or a loan that takes more than just your credit score into account, why not explore our Fintern options? You can download the free app to apply in just a few easy steps.
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