What to do if you are refused credit

Being refused credit is common, and it is not the end of the road. In the FCA's Financial Lives survey, 3.2 million adults, or 22% of those who applied for a regulated credit agreement, were declined¹. A refusal means one lender's own rules said no on that occasion. It does not put you on a list, and it does not stop you applying elsewhere, though it does leave a mark that later lenders can see.

The first thing to know is that you have rights after a refusal. If the lender used a credit reference agency's information in reaching its decision, it must tell you so and give you that agency's name and address². You can then get a free copy of your credit file from that agency, check it for mistakes, and correct anything that is wrong. This page walks through each of those steps, explains how long negative records stay on your file, and sets out where to complain if an agency will not fix an error.

Why lenders refuse credit

A lender refuses credit for its own reasons, and those reasons usually come down to two things: what your credit file says about how you have managed borrowing before, and what your application and circumstances say about whether you can afford the repayments now. Citizens Advice sets out that lenders look at your application details, your credit history and sometimes your income and outgoings when deciding whether to lend⁷.

Your credit file is a record of how you have handled credit: missed payments, defaults, county court judgments, insolvencies and the searches lenders have made. If you are in arrears or have a county court judgment, you may be refused credit⁸. For mortgages, the effect is visible in lenders' own policies. Some high-street banks may refuse a mortgage outright to someone with a bad credit history, while building societies and specialist lenders can be more flexible⁹. Many mainstream lenders refuse mortgages to people with an open county court judgment, or one that occurred in the past three years¹⁰.

Affordability matters as much as history. In a Financial Ombudsman Service case study, the ombudsman found that a lender should not have given a borrower a logbook loan because she was not in a position to take on further borrowing, and the lender should have realised this¹¹. The reverse also applies: a lender can refuse you not because your file is bad but because its checks show the loan would not be affordable for you.

There are other reasons that have nothing to do with your record. Being on the electoral roll at your current address, errors in your application, or not meeting a lender's own criteria can each lead to a refusal. One warning sign worth knowing: if you are refused credit, cards or loans despite having a good credit rating, that can be a sign of identity theft, because someone else may be using your details and damaging your file without you knowing¹². If that happens, the guide to identity fraud and your credit file explains what to do.

The lender decides, not the credit reference agency

A common belief after a refusal is that a credit reference agency has "blacklisted" you. It has not, because no such list exists. The credit reference agencies provide information to help lenders make a decision; they do not say who can and cannot have credit¹³. They do not have a blacklist of people who should not get credit³.

The division of work is this. Credit reference agencies hold the data: your accounts, your payment history, public records such as county court judgments and bankruptcy data, and information from the electoral roll⁴. Lenders choose what to do with it. There is no requirement under data protection law for lenders to report data to all the agencies, so it is up to each lender to decide which agency it uses, if any⁴. Two lenders can look at two different versions of your borrowing history and reach two different decisions, which is one reason a refusal from one does not predict a refusal from all.

The law recognises this split. Under section 157 of the Consumer Credit Act 1974, where a creditor decides not to proceed with an agreement on the basis of information from a credit reference agency, it must tell you that this is the basis of the decision and give you the agency's particulars, including its name, address and telephone number². FCA rules reinforce the point for applications made through credit brokers, requiring that the name and address of any credit reference agency consulted during the negotiations be disclosed¹⁴. So the agency supplies the raw material, the lender makes the decision, and you are entitled to know which agency's material was used.

Asking the lender why you were refused

The finance company should give you good reasons why it turned you down, including whether it used a credit-scoring system⁸. But there is a limit to what you can demand: if you are refused credit, you do not have a legal right to be told why¹⁵. In practice, most lenders will say something, and anything they do tell you is worth having before you apply anywhere else.

If the refusal came from an automated system, you have a specific right. The Information Commissioner's Office guidance says that if a lender refuses you credit because it worked out your credit score just by using a computer, you can ask it to review the decision by an employee of the lender¹⁶. That review can matter, because a computer score cannot take account of circumstances a person would understand.

If you are refused a payment account with basic features, the rules are stronger. The institution must inform you in writing and free of charge of the reason for the refusal, tell you how to complain to it, and tell you of your right to complain to the Financial Ombudsman Service¹⁷. That right to escalate to the ombudsman is the backstop whenever a lender's process itself seems wrong, not just its decision.

Check your file at all three agencies: Experian, Equifax and TransUnion

Once you know which agency the lender used, the next step is to see what it saw. The three main consumer credit reference agencies in the UK are Experian, Equifax and TransUnion⁴. TransUnion was formerly called Callcredit¹⁸, and its data also appears in free services such as Credit Karma and ClearScore¹⁹.

The reason to check all three, not just the one the lender named, is that they keep different records²⁰. Each agency gets different information from lenders, so your credit file may not look the same at each one²¹. A clean file at Experian can sit alongside an error at Equifax, and the next lender you apply to may use either. Checking all three is the only way to know you have covered everything²⁰.

If you are working through debt problems, your credit file is also the place to see the full picture of what you owe. The agencies keep records of all credit histories, including missed payments, and can give you access to this information online²⁰. StepChange suggests using your credit file to find who you owe money to when old debts have surfaced²¹.

There are special cases where checking all three matters even more. If you have experienced economic abuse, you can apply for your credit report either online or through a statutory application from the three main agencies, and you must disassociate from an ex-partner with all three, Experian, Equifax and TransUnion, because a financial association left in place can keep affecting you²². The pages on financial associations and your data rights cover those steps in detail.

Your statutory credit report is free

Every agency must give you your statutory credit report free of charge if you ask for it⁷. Making this request is free of charge⁴, and the agencies must offer your statutory credit report for free¹⁵. You do not need to pay for a subscription or a paid score service to see the file lenders see.

To get a free copy, a person contacts the credit reference agencies and fills in an application form; applications can usually be made in writing, by phone or online⁸. A statutory credit report can be obtained free of charge from any of the three main agencies¹⁹, and a statutory copy of a report can be requested from any of them at no cost⁵. An agency can be asked to post a copy, or the report can be viewed online for free²¹. There is no charge, though card details may be requested to help the agency find the record²⁰.

Your report should be sent to you within seven working days unless the agency needs you to send proof of your identity and address first⁶. The statutory report shows the information held about you, but it does not show the score a lender calculates from it; the guide to how lenders decide explains the difference between the file and the decision. If you want to keep an eye on your file over time, how often to check your credit report and credit monitoring services set out the options, including the free ones.

Wrong information on your file: how to get it corrected

If you find something wrong on your file, raise a dispute with the agency that holds it. The agency has 28 days from your request to tell you if it has removed the entry, amended it, or taken no action⁵. Lenders and agencies have up to 28 days to respond to a dispute, and Experian states it usually resolves issues in less than two weeks¹⁵.

One rule explains why disputes take the shape they do: agencies cannot amend data on credit files provided by other companies without that company's permission²³. So the agency contacts the lender that supplied the entry, and the outcome depends on what that lender confirms. If you feel your complaint has not been resolved fairly, you can escalate it to the Financial Ombudsman Service²⁴.

Two things to keep in mind. First, agencies will not remove adverse information if it is correct²³; the dispute process is for entries that are wrong, not for entries you would rather not see. Second, be careful with anyone who promises to fix that for you. FCA rules state that a firm must not claim to be able to remove negative but accurate information from a customer's credit file, including entries concerning adverse credit information and court judgments²⁵. The page on credit repair companies covers what these firms can and cannot lawfully do, and how to correct your credit report gives the step-by-step process.

If a dispute succeeds, the entry is removed or amended. If it does not, and you still believe the entry misleads, you can ask each of the three agencies to add a notice of correction to your report¹⁰, which is the next section's subject.

A notice of correction lets you explain an entry in up to 200 words

A notice of correction is a short statement you write yourself, which is added to your credit file and seen by anyone who looks at the entry it explains. The Consumer Credit Act 1974 gives you the right to require an agency to add a notice of correction, not exceeding 200 words, drawn up by you²⁶. The limit is the same in every guidance source: up to 200 words³, and it is free to add¹³.

The purpose is to give context a lender would otherwise miss. The ICO describes it as a statement explaining your situation, seen by anyone who looks at the entry on your credit file, which should be taken into consideration if you apply for credit⁴. Common uses include explaining a missed payment caused by illness or a relationship breakdown, or noting that a debt on your file was actually the result of fraud or economic abuse.

A notice of correction is not a way round a dispute you lost. Agencies will not remove adverse information if it is correct, though you may ask to submit a notice of correction to explain the circumstances²³. It is also not a substitute for fixing a wrong entry: if the entry is factually wrong, dispute it first, and use the notice only where the entry is accurate but the story behind it matters. The comparison of notice of correction vs raising a dispute sets out which fits which situation, and adding a notice of correction gives the wording rules.

Negative records usually last six years

Most negative information on your credit file has a fixed life: six years. Missed payments, defaults and court judgments stay on your file for six years²⁴. A default stays on your file for six years²⁷, and it is registered after you have missed between three and six months of payments⁶. Lenders should notify consumers of their intention to register a default at least 28 days before doing so²⁸.

The six-year rule covers most of what people worry about after a refusal:

Debt solutions and write-offs follow the same pattern. Getting a debt written off has a negative impact on your credit reference file and may affect your ability to obtain credit for up to six years²⁹, and the record remains there for up to six years³⁰. Information such as missed payments, default notices and court judgments will generally stay on your file for six years²⁹. The six years run from the relevant date, not from when you first noticed the entry, and nothing needs to be done to remove a record once its time is up: it is deleted automatically. The page on how long information stays on your credit file gives the full breakdown, and rebuilding your credit after debt problems covers what happens next.

Reapplying straight away can make things worse

The instinct after a refusal is to try another lender immediately. That instinct has a cost. If you apply for a mortgage and the lender rejects you, it is recorded on your credit file³¹. Each application leaves a credit search by a lender on your file, and those searches stay for one or two years depending on the agency¹³. A run of applications in a short period is itself something later lenders can see, and it can make them cautious, because it looks as though you are seeking credit urgently.

This is why the sequence matters: find out why you were refused, check your file at the agency the lender named, fix anything wrong, and only then consider applying again. If the problem was affordability rather than your file, more applications will not solve it, and the searches will accumulate. If the problem was an error on your file, every further application is being scored against wrong data.

There are ways to test the water without adding a search. Eligibility checkers and soft credit searches let you see the likelihood of acceptance before a full application, and a soft search does not show to other lenders in the way a full application search does. The narrow page on how many applications is too many covers the practical limits, and does a declined application show on your file answers the question directly.

Financial links to another person show on your file

One cause of refusals that people often miss is a financial association: a link between your credit file and someone else's, created by a joint credit product such as a joint account, joint mortgage or joint loan. A financial association links your credit files, and your record of making reduced payments may affect the other person's credit file and their ability to get credit³². The link works both ways, so their record can affect yours too.

The link is about joint borrowing, not about living together. Landlords can only access your credit file with your consent³², and a tenancy does not create a financial association. But where a joint debt exists, the association stays on your file even after the relationship ends, until you ask for it to be removed. You must disassociate with all three credit reference agencies, Experian, Equifax and TransUnion²². If an agency refuses to accept your notice of disassociation, you can ask the Information Commissioner's Office to review it¹⁸.

This matters after a refusal because a lender reading your file also reads the files of anyone financially associated with you. If you are refused and your own record is clean, an ex-partner's problems may be the reason. The pages on financial associations and does a partner's bad credit affect yours explain how to spot and remove a link that should no longer be there.

Where to complain if an agency gets it wrong

If a credit reference agency will not correct an entry you believe is wrong, or handles your dispute badly, there is a defined route. First, raise a formal complaint with the agency itself, following its own complaints process. You have the right to complain to the Financial Ombudsman Service about how a credit reference agency has dealt with your credit file, but only after following the agency's complaints process first³. If that does not resolve your complaint, you then have the right to complain to the ombudsman¹⁸, and you can escalate a complaint you feel has not been resolved fairly to the Financial Ombudsman Service²⁴.

The ombudsman is not the only body with a role. In Northern Ireland, Consumerline can refer a complaint to the Trading Standards Service for investigation or to the Financial Conduct Authority, which authorises lenders³³. The Information Commissioner's Office oversees the data protection side, including a refusal to accept a notice of disassociation¹⁸. Which body fits depends on what went wrong: the ombudsman for how an agency handled your file or a lender's decision, the ICO for how your data was processed.

Free, impartial help is available at every stage. Citizens Advice and the debt charities, including StepChange and National Debtline, can help you read your file, dispute wrong entries and deal with the debts behind a damaged record. MoneyHelper, the government-backed money guidance service, is the place to start for general questions about credit and debt. If the underlying problem is unaffordable debt rather than a file error, the debt guide sets out the options and where to get free advice.