How Long Does Refused Credit Stay on File?

It can be frustrating to be turned down for credit - especially if you don’t know why. Should you apply for credit at a different lender right away? What about the negative mark on your credit record? 

Let’s take a closer look at what it means for your credit profile when you’ve been turned down for credit, and what you can do to improve your credit score.

What is refused credit?

Refused credit refers to an application for a credit product that was denied. Refused credit can be a stressful thing, and also very inconvenient - especially if you rely on credit to make a big purchase such as a home renovation, or a personal loan for medical expenses. 

This is why it’s important to find out why you’ve been refused credit, so you can make improvements to your credit profile and improve your credit score to become eligible for credit in the future.

Why was my credit refused?

There can be many reasons why a credit application is refused, including:

• A bad credit score: If you often miss account payments, or pay later than the due date, it may have a negative effect on your credit profile. The lower your credit rating, the more likely you are to be denied credit from a lender. It's important to find out what's affecting your credit score so you can take the steps needed to rebuild your credit.

• A short credit history: If you haven’t taken out any loans or credit yet, you may have a ‘thin’ credit history and it can also count against you. This doesn't mean you won’t be approved, but lenders are likely to reject your application.

• Your employment history: Lenders look at your employment history when considering your application and your status may influence their decision. If you regularly change jobs, or are not earning enough, you may be seen as a high risk applicant.

• CCJs and bankruptcies: Any County Court Judgements (CCJs) or bankruptcies on your credit record will indicate that you are in financial difficulty. You may be refused credit because of this - and keep in mind that these entries can stay on your profile for up to seven years.

If you have a very good credit score and have been turned down for credit, you need to find out why. The lender is ultimately the only one that can tell you why your application has been declined. 

There could be a number of reasons why your application is declined even if you have an excellent credit score. Your employment status may not meet the lender’s criteria, or you might not earn enough. You may also have a financial link to someone who has a poor credit profile or outstanding debt.

How long does refused credit stay on file?

Refused credit stays on your profile for two years. All credit inquiries are removed from your credit profile after two years, but keep in mind that credit reporting agencies do not keep record of whether an application was approved or denied. 

How do lenders decide who is eligible for credit?

When you apply for a credit product, lenders typically run a credit and affordability check as part of your application. Card providers also use your credit score to determine whether they are willing to extend credit to you, and what interest rate they offer. 

There are many factors that determine your credit score, including your debt-to-income ratio, your payment history, the length of your credit history and whether you’re registered on the electoral roll.

Other factors that may also affect your credibility include the amount of applications for credit you’ve made recently, and how much of your available credit you are using currently.

If any of these factors are a problem, it may be a red flag for a lender and they may decide not to approve your credit application. 

How do I improve my credit?

There are many ways you can improve your credit, and increase your chances of being approved for credit. These include:

• Fixing errors on your credit report

• An increase to your income

• Make all bill payments on time

• Register on the electoral roll

• Ensure you have a low credit utilization

If you haven’t borrowed before it is difficult for a lender to assess your creditworthiness. Borrowing small amounts to build your credit record will go a long way in helping you qualify for larger credit amounts in the future. Take out a small overdraft, or a credit building credit card to help you improve your credit.

Always ensure you handle your credit - even if it’s a very small amount - as it will have an impact on your credit score and help you build a healthy credit profile.

Your payment history during the last 12 months is very important to lenders, so make sure that you always pay bills on time and keep your credit utilization as low as possible. Using up all your credit every month will show that you rely on credit to make ends meet.

Also, keep in mind that you should not apply often for credit as the number of inquiries on your credit profile can also be a negative mark if you apply too often. 

FAQs

Should I apply again if my credit application was declined?

You should first check your credit report to see if there is a reason why you’ve been declined. If you can’t see any reason, you need to get in touch with the lender and ask for reasons why you’ve been declined. Without fixing possible issues with your credit profile, you should not apply for credit right away.

What should I do if I’ve been refused credit?

The most important thing to do is to improve your credit score. Having a good credit score can help you maintain good financial health and improve your chances of successfully applying for credit. If your credit score is excellent, approach your lender and ask why they’ve turned you down. Don’t forget to correct any mistakes on your credit report that might be a deciding factor on your applications.