Archive Website of the UK government

How lenders decide who to lend to

When you apply for a loan or credit, lenders want to know that you're going to be able to repay any money they lend you. The two key ways they usually assess this are:

Credit scoring

To work out your credit score lenders ask you for details of:

They give points for each of your answers. If you don't score enough points, they may:

A lender won't usually tell you why they've refused you a loan but they may give you a general idea if you ask them.

Can you ask them to reconsider?

You can ask them to reconsider if:

Applying to different lenders

Lenders score customers in different ways, so you can try again with another lender. But bear in mind that each application will be noted on your credit file kept by credit reference agencies. Too many refused applications will have a negative effect on your credit history.

• Credit scoring - Money Advice Service Opens new window

Credit reference agencies

Credit reference agencies hold information (called a 'credit history') on most adults in the UK. This information helps lenders assess the risk of lending to particular people, and reduce the risk of fraud. The main agencies are Experian, Equifax and Callcredit.

To put together your credit history the credit reference agencies get information from several sources, including:

Your right to check your credit file

You can't stop lenders checking your credit file, but the law says you can see what's on it. You'll have to pay, but credit reference agencies can't charge more than £2 for this. You may also be able to see your file online, but this may cost more.

Getting incorrect information removed from your credit file

The Data Protection Act 1998 gives you the right to have information on your credit file corrected or removed if it's wrong (but not just because you don't like it). The credit reference agencies will tell you how to do this.

Some commercial credit repair companies offer to remove information from your file to clean it. The FSA warns against using them - it's best to get in touch with the credit reference agencies yourself.

• Credit reference agencies - Money Advice Service Opens new window

Credit refused due to identity theft

You could be refused a loan because your credit file shows that you haven't kept up the repayments on a loan you didn't even know about. This can happen if someone's stolen your identity and applied for loans or credit cards in your name. Follow the link to find out how to avoid or deal with identity theft.

• Identity theft - learn more (rights and responsibilities section)

Free help and advice if you've been refused credit

If you've been refused credit because you've already got too many loans you can get free help and advice on planning your way out of debt from a number of organisations. Read more in our section on planning your way out of debt.

• Plan your way out of debt

More useful links

• Take the Money Advice Service interactive debt test Opens new window

• Managing your money (young people section)

• Managing debt