Turned down for a loan - what will happen to my credit score?

Question

I recently applied for a loan in order to furnish a new home I have bought with my girlfriend. We need a lot as we've been renting a furnished apartment.

We were turned down, regardless of having a high income and there likely to be no problems whatsoever in making the repayments. The two deciding factors were apparently as follows:

- I'm not in enough debt (These were the words of the bank assistant). Because I choose not to take out a credit card or unnecessary loans, instead living within my means, I'm considered too risky!?
- I live in a new build. Apparently, the fact my address was not in their system went considerably against me, which seems ludicrous.

This all seems backwards to me - because I manage money well and have an income high enough to afford a brand new home I am a branded a bad credit risk. If I had 7 credit cards and a load of debt, I'm more suitable, apparently?

The question is, what happens to my credit score? I know it's affected adversely, but how badly.

Answer 1

I know that it is a ridiculous situation!

The problem is for lenders though is that as you have no credit history, they have no idea how good you are at making repayments. Even people who can afford repayments don't necessarily make them.

Being turned down for a loan will not affect your credit score though, its not going to be worse than before you applied. However, if you make more than 2 - 3 applications in the space of 6 months, it will adversely affect your score because it looks like your desparate for money and therefore less likely to pay it back. Its not the fact that you get turned down that goes against you, just the number of times you try.

If you have only made the 1 application, then you can safely make another. What you need to do is to take out some form of credit to start building up your score. The best option is one of the credit cards specially for people in your position. They have high rates of interest and low limits, but if you stick to the repayments it will start building up your score and after 6 - 12 months you will be upgraded or can apply for a "normal" card.

Again this may seem strange, but don't pay off the whole balance of the card each month, as that again can go against you. Although it shows you are good at paying back what you've borrowed, it says to future lenders that they aren't going to make any money out of you in interest, which is their other primary concern.

Unfortunately with the current economic climate with debt levels higher than ever before, the lenders are starting to be much more cautious about lending, as the previous situation of literally throwing money at people has caused them huge problems with people not paying it back!

There are a number of cards for people in your position, try Capital One first (who are very likely to give you a card), then Aqua, then Vanquis. You can find out all the details by searching on their names in Google. Its almost certain that one of them will give you a card, but if you get rejected leave a couple of months before applying to the next one.

Over time you will build up your credit history, and will have much less problem getting credit.

Answer 2

They do seem to have it the wrong way round don't they but this is for a reason.

It's because you have not had previous debt that they have turned you down. This is because even if you were the most honest person in the world who has never owed anyone a penny, to the bank you're just another punter.

Before they lend you money they want to know that they are going to get it back. Because you haven't previously had loans or credit cards they cannot tell from your credit history what you are going to be like when it comes to paying them back.

As far as your credit score goes you can now get free credit checks on-line just google 'free credit check'

Answer 3

Having no credit is sometimes as bad as having bad credit. Because you haven't owed anything, then they consider it as you haven't PAID anything.
It surprises me that they didn't use your previous address. They need this for tracking and verification.
Usually being turned down for a loan is bad on credit (not very bad in your case) but you lose a couple of points. But If they didn't look up your previous address and your actual history then you may have nothing to worry about. They may have never connected it to your record.
The first reason makes sense but the second one doesn't. It either sounds like a bad institution or a lazy loan officer.
The thing to do is take out one card, use it, pay it off, get a loan, close the card.
Each card you apply for (rejected or accepted) counts against your score as well.

Answer 4

Your credit score will not be hurt by being turned down but you need to establish some credit. No credit is as bad as bad credit. Get a small loan or credit card to establish some credit.

Answer 5

You will probably find it's not worth applying for credit at all for the next six months as you don't have any kind of credit record from the sound of it. Your best option is probably going to be to save up and pay for the furniture that way. After moving into a new home, you will always find this to be the case regardless of if it's new build or not.

If you're in the enviable position of not having any debt, it's a good idea to stay that way.

You will also feel as if you've earnt your furniture more if you pay for it from scratch. By rushing in and buying loads of stuff at once, you may find that six months from now, you've chosen the wrong stuff and you don't like it any more anyway. Slow down and don't rush in.

Answer 6

Credit reference files hold details of anything a lender wishes to leave (subject to certain conditions)

This application could simply state the name of the potential creditor and that they carried a search out on you....thats all

Some lenders may state that a debtor didnt pay 5 out of ten times etc. Some names on there are known named debt collectors (which may put lenders off) Some may simply say that a person borrowed X amount of pounds.

There is no score....only references

You can ask for a copy of the file and it will cost you £2

Two leading ones that are used are experian and.....cant remember the 2nd name...sorry

Answer 7

basically because you've never had any credit they don't know weather you can pay it back or not..i.e your a high risk....

my mum owns two houses and has never had a bank loan or credit card in her life and got turned down for £1000 loan

Answer 8

The absolutely free reverse vin check sites generally provide fake information. To get real information, money will have to be paid. The free searches provide fake information so they can get your email address to send spam.

Stay away from shady reverse vin check sites, most likely you won't get any information after you make the payment. Not to mention you won't get a report and you won't get an answer if you try to call for a refund. Stick with a reputable reverse vin check site like http://www.reversevincheck.net that has been around since 1995.

Answer 9

i had the same happen to me, especially the address bit, but this was for a new cooker on credit. (like if the address didnt exist the delivery guy would just leave it in the middle of a field for me to nick!!!!!!)

your credit file will only record the fact the application was made, not the result, so being turned down will not affect it any more than the initial application did.

Answer 10

Have you considered getting credit cards at furniture places...this would solve 2 problems...it would build your credit (what banks are looking for) and you would get your furniture.

When my hubby and I bought our 1st house we had the same problem...we got cards at Furniture Row and Art Van (two local places to us, you need to find somewhere around you that offers cards)...At art van we got 0% interst for 1 year, and at Furniture Row we got no payments no interest for 2 years...this is better than what you could get at a bank, and we got some nice stuff!