Last Updated on Mar 11, 2020 by James W
If you have been refused a loan for your start-up or SME try not to be too despondent. While the thought of being denied credit can drive you to despair, there are ways that you can borrow money, or improve your credit rating, to ensure that this does not happen again. If you want practical advice on dealing with the refusal of a loan, and how to make your credit history more appealing to prospective lenders, then you need not look any further. This guide will give you the lowdown on loan refusals:
What You Do Next
If you have been turned down for a loan for your business, you do have the legal right to know why your application has been rejected. You can ask for a search of your credit file to be made available to you. What is more, you can ask which reference agency your lender had used.
Mistakes can happen in an application, so if you spot something that you believe to be unfair, then you need to ensure that you take proactive steps to get this mistake erased from your credit history, lest you have a loan refused again in the future. The credit agency will have 28 days to act, so it is imperative this is resolved in the first instance. You do have rights to dispute any information on your credit history, so don’t take a refusal as a sign to give up.
Try Other Lenders
There is a plethora of lenders available for those that have a poor credit history. Bad credit loans are available to those who are in dire need of financing. You will have to apply using the application form and explain what the need for the money is. You may also have to pay a higher rate of interest, but if you do need a loan for your company in order for it to be more profitable, then this shouldn’t be a problem. Business loans are notoriously difficult to get from mainstream lenders, so opting for alternative lenders will be better for you in the long term.
Remember only to borrow what you can afford and ensure that you keep up the agreed repayments.
Do not Keep Applying
If you are turned down for credit repeatedly, then you need to stop applying. Do not keep attempting to apply for business loans and credit cards in the hope that someone will accept you. These repeated applications are on your credit history, regardless if you have been successful in receiving a loan or not. Multiple applications in a short space of time can be very damaging to your credit history and can ultimately make lenders think that you are desperate for money that you can ill afford to pay back. This is where bad credit loans can help if you are in a financial quandary.
Remember, your credit rating affects how much you can borrow and the rate of interest that you will pay so ensure that your credit history is squeaky clean and avoid multiple applications.
Improving Your Credit Rating
While your credit rating may be poor at the moment, you can take positive steps into rebuilding it so that it is more attractive to prospective lenders.
One of the key considerations to remember is that you need to ensure that you are on the electoral register. Having a fixed abode is imperative. It proves that you are stable and able to support yourself. What is more, this is where lenders can find you, should you not be able to keep up with the repayments on your loan.
You can fix your credit rating by ensuring that you clear any high levels of existing debt. Lenders will be nervous about giving someone more cash if they are financially overstretched. What is more, if you make late payments on anything, from your mortgage to your commercial rent this will ultimately affect what and how much you can borrow. You need to ensure that your bills are paid on time so that you are not duly affected when it comes to borrowing for your business. These take roughly six years to clear from your credit file.
Should you have a CCJ, or county court judgment, for an unpaid previous debt, then this will affect you in a serious way when it comes to applying for a loan. Ensure that you pay your bills on time and that you are not taken to court to have money retrieved from you.
Remember to close off any credit card accounts that you never use. Lenders look at how much credit you have, not what you are using, so clear and cancel any unused accounts to prove that you are a worthy borrower. While it may seem ridiculous, it will harm your credit rating. You have to play into the hands of the borrowers to ensure that you can loan money to improve your business.
What is more, if your business partner has a history of bad borrowing then you may be liable for his or her misgivings in the past. This is what is commonly known as financial association and as such, will affect your ability to take out loans or credit. This can be difficult to resolve as you and your business partner will undoubtedly share a bank account. Try to be as financially independent as you can, to ensure that you can borrow money.
How to Check Your Credit History
Before you make an application for credit, you need to ensure that you are in a financially viable place to do so. You can check your credit history through three different agencies
Experian
Equifax
Call Credit
Checking your credit rating will give you a better understanding of what you can borrow and where you have gone wrong. Ironing out any issues with your credit history is important, prior to an application, for lending. Fixing any issues will make you a much more viable lending option and increase your opportunities tenfold and ultimately, you can make your business prosper.
