Being turned down for a loan, despite having good credit


Andy Townsend

Written by: Andy Townsend
Head of Marketplace Distribution, Consumer
17th January 2022

If you’re looking to take out a loan, you’re likely aware of how important your credit rating is - It’s a key factor taken into account when assessing your suitability for to borrow money.

But there are many other things lenders consider. A poor credit rating isn’t the only reason people can be declined for a loan. It’s even possible to have an excellent credit score but still get refused credit, but there are things you can do to improve your chances of being accepted.

In this guide, we’ll look at the main factors lenders generally take into account when deciding whether to offer you credit, plus some tips on how to improve your chances of getting a loan.


How does a credit score affect your loan eligibility?

Having a good credit score can help to increase your chances of being offered a loan with a better interest rate. So, it’s a good idea to improve your credit score before you apply for a loan.

Many factors can affect your credit score. For example, opening different bank accounts and/or multiple credit searches in a short period may temporarily lower your credit score. If you miss repayments to your credit card provider, this can also lower your score. So it’s crucial to try to improve a low credit score if you’re looking to take out a personal loan.

However, a healthy score doesn’t guarantee credit because it’s not the only factor a lender will consider. If you have an excellent credit score but are refused a loan, it could be due to you not meeting other criteria set by the lender. Let’s explore some of the factors that may affect your chances of getting a loan.


You’re unlikely to repay the loan

Lenders like Shawbrook Bank, have a range of “affordability indicators” which are used to determine someone’s ability to make repayments. We may look at things like your disposable income and whether you’d be able to meet repayments if your circumstances changed.

If you already have debts, you will need to be able to continue to handle your existing repayments alongside your new loan. You need to be comfortable with all your commitments otherwise you may end up in financial difficult.

If a lender is concerned that you may not have the ability to pay, you maybe turned down for a loan even if you have good credit.

You’re self-employed or have an irregular income

By the fourth quarter of 2019, there were more than 5 million self-employed workers in the UK. Although they represent 15.3% of the workforce, many banks are still hesitant to lend to self-employed people due to changes in income.

Lenders want to know that borrowers will be able to repay their loans on time, which is why workers with irregular earnings or those who are self-employed may find it difficult to get approved for a loan, even if they have a good repayment history.

It can be helpful to keep precise and accurate records. You’ll likely be asked to prove your income and outgoings for the previous two years and show evidence that you reported your earnings to HMRC.

At Shawbrook Bank, we consider your unique circumstances when determining your loan eligibility. We can lend to the self-employed, but you should also consider shopping around to find a lender that suits you and your situation.

It’s also worth noting that if you work part-time, getting a loan may be more challenging. Some lenders set minimum income thresholds, and some part-time workers may struggle to meet the criteria.


Your credit file contains inaccurate or incorrect information

It’s possible to have a good credit rating but be denied a loan because of a mistake on your credit report. For example, if you received a county court judgement and settled it before the deadline, it shouldn’t appear on your record. So, if it’s incorrectly noted, there could be an administrative error. You may also find that there’s no electoral roll information on your credit file, despite being registered to vote at your current address.

It’s worth checking your credit file frequently to ensure there aren’t any inaccuracies, particularly before you apply for a loan. If there are errors, you will need to dispute them. The easiest way to do this is to contact the company that registered the data and ask them to update this. Alternatively, you can get in touch with the credit reference agency (such as Experian, Equifax, or Callcredit) and raise a dispute with them. For more information, you can find credit guidance on the Information Commissioner’s Office website.

When you apply for credit, the lender will look at information on your credit report, and it’s vital to understand how credit checks can impact your score. For example, a soft credit check means the lender’s credit search will be recorded on your credit history, but it won’t be visible to other lenders. Generally, this means it won’t affect a credit application you make in the future. Whereas a hard credit check is recorded on your file and other lenders can see this search. Because a hard credit check leaves a footprint on your credit file, it can impact your credit score and could reduce your chances of getting a loan. Find out more information about credit checks and credit searches in our guide.​

Applying for multiple personal loans may hurt your credit score and future lending eligibility. If you have been refused a loan with a lender, you should take time to understand why before applying for more loans. It’s best to avoid applying for credit from different lenders over a short period because multiple hard credit searches can impact your credit score.

At Shawbrook, we base our decision to offer a loan on your circumstances and information from credit reference agencies. If we turned you down for credit, there could be a variety of reasons why we came to a decline decision. For more information, you can also contact the credit reference agencies we use, Equifax and Transunion.

Watch our video below to learn more about the importance of your credit score.



A healthy credit score is an important factor in obtaining a loan, but it’s essential to consider other factors that affect your credit score when applying for personal loans. If you have been denied credit, you should review the lender's criteria to understand why your loan application was unsuccessful.

We like to keep our approach to borrowing straightforward. That’s why we use a soft credit search when you apply for a loan quotation. If you’re eligible for a loan with us, we’ll offer a guaranteed personalised rate and the quote won’t impact your credit score, giving you the freedom to shop around before deciding if a loan is the right option for you. We’ll only record a hard credit search if you decide to apply for the loan.

For more information and tips on how to improve your chances of getting a loan, check out our guide on maintaining a healthy credit score.