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How long can you reapply after being refused for a loan?

After being refused a loan, you should not reapply immediately. While there is no fixed amount of time you should wait, giving yourself at least 3 to 6 months before reapplying is essential to avoid harming your credit score. But first, you need to do a couple of things.

What should I do right after being refused a loan?

When you apply for a loan in the UK, whether a personal loan, mortgage, or other type of credit, the lender will review your financial situation and credit history to decide whether to approve your application.

Unfortunately, not everyone gets approved the first time they apply. The most important thing is understanding what happened and why your loan application was declined.

There are a few common reasons why a loan application might be declined:

  • Poor credit score: Lenders use your credit score to determine whether to approve your loan. If your credit score is low, the lender may view you as a higher-risk borrower and decline your application.
  • Low income: Lenders want to ensure you have enough income to make the loan payments comfortably.
  • Unstable income: If your income is too unstable, for example, if you're self-employed, the lender might be concerned about your ability to make all payments on time.
  • Too much existing debt: If you already have a lot of outstanding debt, such as credit cards, personal loans, or mortgages, the lender may be concerned that you won't be able to take on additional debt.
  • Lack of credit history: If you're a young adult or new to the UK, you may not have much credit history established yet. Lenders like to see a track record of responsible borrowing. Otherwise, they can't tell if you're a good borrower.

These aren't the only reasons. Sometimes, it may be due to the lender's own criteria. Other times, it might be due to errors in your credit report. You'd be surprised how often things like incorrect account information or fraudulent activity can pop up in someone's credit report.

When and how should I reapply for a loan?

Being refused a loan doesn't affect your credit score. You can also apply immediately—lenders will still consider your new application. This is the good news.

The bad news is that if nothing has changed since your last application, you will probably get refused again, which will have consequences for your credit score. Here's how to do it right.

First, wait at least 3 to 6 months.

Most experts recommend waiting at least 3 months before reapplying for a loan after being declined. Experian, one of the UK's largest credit reference agencies, recommends 6 months. Each time you apply for credit, a "hard inquiry" is left on your credit report, which can temporarily hurt your credit score.

There are multiple reasons why a hard inquiry (also called a hard check) affects your credit score, but it's mainly down to two things:

  • It's a signal that you need credit to begin with. Lenders might wonder why you suddenly need money – could you be struggling?
  • It can also indicate that you'll soon have a new credit account not yet showing up (since it will take at least a month for the account provider to report this new account to the credit agencies). In other words, more debt.

If you apply again too soon, the multiple hard inquiries could continue to lower your credit score, making it even harder to get approved. Waiting 3 to 6 months gives your credit score time to recover before reapplying.

Second, address the reasons for the loan refusal.

Before reapplying, you need to fix what went wrong. This could involve:

  • Improving your credit score by correcting errors on your credit report and downloading a credit-building app like Wollit.
  • Increasing your income through a new job, raise, or side hustle;
  • Getting a full-time job if you're self-employed: Sadly, self-employed people have a much harder time getting loans than full-time employees.
  • Reducing your existing debt levels by paying down debt.

You should also consider adding a Notice of Correction to your credit report. This is a short 200-word note through which you can explain why a certain adverse event in your credit history (bankruptcy, default, etc.) happened. Lenders might understand if, for example, you missed a few payments in the past because you were sick or lost your job. You can check out our guide on how to add a Notice of Correction to your credit report here.

Third, consider getting a guarantor.

If you're still having trouble getting approved independently, you could consider applying for the loan with a guarantor. A guarantor, usually a family member or close friend, agrees to repay the loan if you can't.

Having a guarantor with good credit can make a big difference and increase your chances of getting approved. Remember that the guarantor is taking on a significant responsibility, so ensuring they understand the risks is important. They'll also have to be able to pass a hard credit check as part of the application.

What should I do if I'm refused again?

Even after taking all the proper steps, your loan application may be declined again. If this happens, don't get discouraged. There are still a few things you can do.

First, ask for feedback. This is especially important if your application was denied by the same lender. Ask them to tell you precisely why they made that decision.

Second, consider a secured loan. If you're having trouble getting approved for an unsecured loan, even with a guarantor, you could look into a secured loan instead. Secured loans require you to put up collateral, such as your car or a savings account, to back the loan. This can make you a less risky borrower in the eyes of the lender.

Third, keep working on your credit score. Getting declined for a loan can be frustrating, but it doesn't have to be the end of the road. You can eventually get the loan or mortgage you want by understanding why you were refused, waiting a few months before reapplying, and taking steps to improve your credit.

One of the tools that can help you get there is Wollit. Wollit is an app that reports your monthly fixed-fee subscription as a loan repayment to credit reference agencies. This directly builds your credit history and helps you raise your credit score. And, unlike other options like credit building cards or loans, Wollit keeps you safe from high-interest charges and unexpected fees.

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