Short term lenders or payday lenders are obliged to check your credit background. Now that the Financial Conduct Authority (FCA) rules have kicked in payday lenders will be under pressure to check potential customers even more carefully. The FCA rules do not apply only to short term lenders but, in fact, to the whole financial services sector.
With the new FCA rules in place it is more important than ever to ensure you can get a loan if you need one. Here are a few reasons why a lender may turn you down when you need a loan.
- Perhaps you have not borrowed money in the past
Many people find it strange that not having borrowed money previously could count against anyone wanting a loan be it a payday loan, short term loan, credit card, mortgage or any other type of loan. Not needing to borrow money should mean that we are taking care of our finances and saving so that we are able to pay cash for what we need. The financial institution you are asking to lend you money, however, wants a history of how well you have managed your debts. Having no credit record could count against you so if you have no credit history it may be worthwhile borrowing a little and then paying it off in time just to build up a provenance. Now that banks and utility companies share details about customers there are opportunities to build a positive credit history.
- There may be too many searches on your credit report
Whenever you apply for credit the lender you are applying to will conduct a search on your credit report. This search will leave evidence that a lender has done a search. In the case that you do not borrow from the lender the footprint will still remain and it may appear that you are building up too much debt. If you apply to several lenders in a short period of time it could look bad on your credit report so take care when you shop around for credit.
- You may not fit the lender’s profile
Different lenders use different ways to calculate their scores. Some lenders target specific groups of borrowers and you may not fit that profile at the time you are applying for credit. They may be looking for a particular age bracket or a particular socio-economic group. This is not something you can control but it is good to keep in mind when applying for credit. Payday lenders generally do not limit their profiles.
- You have had financial problems in the past
This is the most obvious reason for not getting credit from lenders. If you have missed payments it will take three years before the bad credit history clears. If you have a bad credit history it is extremely unlikely that a registered lender will be willing to give you a loan.
- You are not on the electoral register
This is the easiest to remedy and one of the most common reasons that people are turned down for credit. Lenders will use the electoral register to check that you are who you say you are. If you are not on the register the simple solution is to register and also to ensure that your details are up to date.