What can you do if you are turned down for a credit card?

Being refused for a credit card can be both frustrating and worrying – but it is important not to panic as there could be a simple explanation. AAD Consumer Forum takes you through the process of what to do if a lender refuses your credit card application step by step from how to check if there is a problem to fixing any problems.

Don't panic

The first thing to remember is try not to get too hung up on the fact that you have been rejected as it may just mean you have applied for a very popular card or the provider is only accepting those with a spotless history. Just because you have been declined for one card does not automatically mean you will be declined for them all. That said, one of the worst things you can do at this point is to start applying for loads of new applications.

This is because applying for multiple credit cards in a short space of time can damage your credit rating.

Although your credit file will not show that you have been rejected, for each new application you make a lender will run a check of your credit which leaves a mark on your file. The exception to this is the new 'unrecorded search' or eligibility check service offered by many providers which leaves no visible trace of the search to other credit providers.

If you apply for several credit products one after another it can make you look desperate for credit and indicate to other lenders that you are struggling to get accepted; which ultimately will add to their risk. Experian says: 'Unfortunately there's no golden rule on how many credit application searches might alarm a lender and in many cases it's only when you collect quite a few AND other information also suggests issues, such as you being maxed out on several credit cards, that credit scores usually start to be significantly impacted.'

If you're looking to borrow in order to pay off other debts or to help you pay bills and living expenses at the end of the month then it's worth talking to a free debt adviser as soon as you can. You can find out more about where to find help on the Money Advice Service website.

Find out why you were rejected

The most important step is finding out the reason why you were refused – lenders have to tell you if you were rejected because of a search of your credit history and which of the three major credit referencing agencies it used to search your file.

Although they do not have to answer it is also worth asking some more questions to dig around for the exact reason you were refused.

Check your credit report

The next step should be checking your credit file using one of the major credit referencing agencies, Equifax, Experian and CallCredit. However there are also some free variants which utilises the same info from the main 3 CRA's. These include Noddle (Data Provided by Call Credit), Clearscore (Data Provided by Equifax) & MSE Credit Club (Data Provided by Experian). These are explained in more detail on our Credit & Fraud Agencies guide.

They often offer trials to give you access to your report for free for a month. But these will require you to put in your bank details before you gain access. So make sure you set a reminder to cancel before the end of the promotion before you start paying any subscription fees.

Checking your file will show you all the information the lender had access to when reviewing your application. It include information such as how many accounts you have opened, your repayment history, your available credit and the age of all your accounts.

Your credit file will be able to show you importantly if there is anything dragging you down. It could be due to only one thing or a combination of lesser reasons.

It is important to comb through your report carefully as there could be a simple mistake stopping you from being accepted and in some cases it could even be a fraudulent application using your details to blame.

Improve your rating

There are a number of ways to improve your credit score in general such as making sure you're registered on the electoral roll, making sure all your previous addresses are included or clearing up any mistakes. If you have found any entries you do not recognise this can be a fairly easy fix – first of all contact the company in question and get it removed from your credit file.

You could also contact the credit reference agency to raise a dispute. The company will add a note on to your file while it looks into your case before either correcting it or give evidence showing it is right.

Whatever the outcome you will be allowed to add your own note to explain your side of the story. Remember if there is a mistake you may need to correct it with all three main credit reference agencies. It could be worth speaking to the lender which refused your initial application to see if it will reconsider your application once you have corrected the mistake.

Unfortunately not all problems will be a quick fix and for some improving their rating will just be a case of improving their habits. Staying on top of existing debts and setting up a direct debit to make sure you always pay on time will help. If you are already struggling with a large overdraft or negative balance you should speak to existing lenders to see if they can help set up a repayment plan or help you avoid extra fees.

Choose the right lender

When you come to make another application it is important that you do your research before diving in asking for more credit. Your choice of card and lender can increase your chances dramatically. If you have a decent rating but just not one high enough to get a premium card you will be best off opting for one with a shorter balance transfer, special offer interest deal or a slightly higher APR.

Putting in some some time to research the lending criteria of each different credit card company may seem like a hassle but could save your from further rejections. Restrictions could include a minimum salary or age, some specify that you must have had no CCJs in the past five years or no history of bankruptcy, you have no history of late payments or going over your credit limit and even that your existing debts are less than a certain percentage of your income.