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While applying for credit is fairly straightforward, there are a number of issues that people should be aware of, to make sure they get the best offer and don’t harm their credit file.
You can apply for credit via:
Your bank
A credit card
An online loan
You can apply for a credit card by using a credit card eligibility checker online and if you are looking for a loan online, you can find a loan eligibility checker. Some people don’t even have to apply as a lender may send a pre-approved credit card offer or a pre-approved loan offer through the mail.
If you already have credit, a lender may decide to offer you an increased credit limit or a top-up loan. In these instances where it looks like you are pre-approved, it will still be necessary for a lender to confirm your eligibility for credit.
It’s important to understand how applying for credit affects your credit score and how accepting a credit agreement affects your credit report.
The first thing you should be aware of is that not all credit is suitable for everyone. When a regulated lender makes a decision to offer credit, they consider a number of factors that give them a good idea of the creditworthiness of the applicant, as well as their ability to afford the loan. In practice, this means lenders are looking for signs that you will be able to afford the loan and also that you are the type of person to repay the loan.
If you have a number of instances in the past where you are repaying late, that will count against you. If you have outstanding CCJs it will be very hard to find someone to lend to you. If you have taken a number of bad credit loans or payday loans, lenders may view that as risky behaviour.
When determining affordability, a lender will not only look at your past credit history but is more concerned with your current credit status as well as the amount of income you make and the expenses you have. If you have a number of high-interest loans outstanding, that may point to risks around you being able to afford more credit. If you have low income but high expenses, that would also imply that any interest expenses could be unaffordable.
If you have high income and low expenses, that means you have disposable income that can cover interest payments. Lenders will look at this kindly.
Also, if you have access to credit, but haven’t used much, for example, if you have a high credit card limit, lenders may also determine that additional credit will be fine for you to handle. If you also have a relatively clean credit history, that will make a decision even easier.
If you don’t have a clear credit history, that doesn't mean you can’t get credit. What it does mean is you need to be extra careful with the credit you take. There are a number of high-cost lenders that will give you credit, but be very careful as the cost makes it very hard to repay and can cause undue stress in other parts of your life. You should look for a bad credit loan eligibility checker online, making sure it is one that offers a soft search service.
Most of the eligibility checkers online for bad credit will be soft searched, but some are not, so it’s very important that you make sure. If you have bad credit and apply online for a hard search, you could risk having a bunch of searches show up on your credit report. Future lenders will see that you applied a number of times and were told no. This could indicate you are credit hungry which increases the risk to the lender and could make it harder for you to get suitable credit in the future.
In general, remember that lenders do want to give you a loan. They are in the business of giving loans to make money, so the more loans they give, the more money they make. But also keep in mind that these lenders are regulated by the FCA, and they want to get their money back, so if you don’t pass their creditworthiness and affordability assessments, the chance of getting credit will be low.
If you are looking for a loan in the UK, the most popular way to apply is online. Most of the price comparison websites will have a loans eligibility checker that you can use for free and most will perform a soft search. It’s usually best to try these first, so no other lenders can see you were searching for credit and penalise you.
After you check your loans eligibility, you will usually see a list of loans available to you. In many cases you will have pre-approved eligibility, meaning the lender has approved you based on the information they have so far, but you still aren’t 100% there. They will still need to verify some info, get your bank details, etc, but you have passed the hard part around creditworthiness and affordability.
After finding out what loans you are eligible for, the next thing to do is understand which of those loans are suitable for you. All loans are different, and it's important not just to focus on the APR of the loan, but also on the total amount payable, the repayment schedules, and of course what happens if you aren’t able to repay on time.
Everyone has different lives, different situations and different needs at the time they apply for a loan. Only you know what is the best loan, but just make sure it's one where making your monthly payments on time is not too painful.
It’s usually a good idea to go with a lender who is not too punitive if you do end up missing a payment here or there. Some lenders understand that life happens, while others seem to make it part of their business model to add on fees to people in distress. Try your best to avoid them!
Applying for a credit card in the UK is a similar experience to applying for a loan. The easiest way is to go online, to one of the many price comparison sites, fill in your details and see what offers are available to you. When you apply for a credit card, make sure you visit a site that can do a credit card eligibility soft search.
Similar to applying for a loan, you will most likely see a list of credit cards that are available to you. Some offers may show 100% pre-approval, while others will only show 50% pre-approval, meaning the lender hasn’t said no, but they will need to collect more information about you before they can make a decision.
As long as you are checking your eligibility with a soft search, you can check to see what you are eligible for as many times as you like. This isn’t to say that a lender will change their decision so quickly, but it highlights the value of doing a soft search. If you can do a soft search eligibility checker, you are given the option to check many different credit card websites and find the deal that is truly best and most suitable for you.
As with loans, and any financial product for that matter, once you see what credit cards you are eligible for, you need to then sort them by the ones that are most suitable for you. Are you looking for a credit card to build credit? Or maybe you want a credit card to start getting rewards? Maybe you just want a new credit card as you don’t like your existing provider. Whatever your preference, make sure you look at more than just the price or APR, as repayment periods and penalty fines may be more appropriate for your current situation.
Today in the UK, most lenders will not do a hard search at first. However, some still do. Some lenders may only do a hard search as they want to prevent people from applying as much as they want. If a lender says they are doing a hard search, this means that even if they say no, other lenders will see that in the future.
One hard search is not a big deal, but if you are applying on a hard search credit eligibility checker, that could result in a number of lenders saying no at once. If this happens, it’s almost guaranteed that future lenders will wonder why you applied so much and why so many lenders said no. Given this information, they are more likely to say no to you.
This whole problem can be prevented by just doing a soft search. Hard searches are not always bad and it’s inevitable that you will see hard searches on your credit file. When you apply for credit, get accepted for credit and then accept the credit agreement, most regulated lenders will be required to put a hard mark on your file. This is not a problem as it happens whenever anyone gets credit. What you want to avoid is hard marks on your file when you don’t get any credit.
You also want to avoid taking too much high-cost credit as that will look bad, even if you pay it back on time! It goes without saying that when you are searching for a credit card for bad credit or to see what your credit card for bad credit eligibility looks like, try your hardest to only do a soft search.
Applying for credit with a soft search means only you will see that application on your credit file. In the future, if you are checking your loan eligibility in the UK, none of the lenders will see what you previously applied for. This means they can’t penalise you for previously applying and getting rejected.
Previously in the UK, most credit applications left a hard mark. This had unintended consequences as it meant people who got turned down for credit today would have a harder time in the future, even if nothing else had changed. Today, most lenders have moved towards a soft search model at first.
The importance of doing a soft search gets more important the worse your credit file is. If you have a perfect credit score and loads of income, most lenders won’t care about the number of searches. If you are like most people and don’t have a perfect credit score, lenders will look for other signs and if they see lots of hard searches in a short period of time, that could spook them.
Luckily, most credit card eligibility checkers for bad credit are nowadays soft search, but we can’t highlight enough how important it is to double check!
There can be confusion around seeing that you have been given a 100% pre-approval on a price comparison site only to be told later that you are not approved. This could be due to the lender not being able to verify your income or that the bank account you provided belongs to you. In many cases, you can contact the lender directly to get to the bottom of it.
If you get rejected after seeing a 100% pre-approval on an eligibility checker loan, it’s best to find out why you were rejected first, and if you think that is incorrect, you can dispute it.
Checking your eligibility for bad credit is the same process as checking your eligibility for good credit. All of the lenders will need to perform a creditworthiness and affordability assessment that is determined based on the type of credit product. If a lender is giving bad credit loans, they will have to take extra care to make sure the loan is suitable.
For bad credit or good credit, when you check loan eligibility online in the UK, it’s basically the same process. Some of the online eligibility checkers will specialise in bad credit or good credit, so look out for those as you may be able to find a better offer. I know we are starting to sound like a broken clock, but remember to always do a soft search when you apply online for credit or when you apply offline for credit.
There is no benefit for doing a hard search when you are just seeing what might be available to you.
If you apply for credit and are not accepted, you are entitled to know why. If you get in touch with a lender, to ask why, they need to tell you if they declined you based on data provided by credit bureaus or if they declined you for another reason. If they rejected you due to bureau data, you are entitled to contact the agency directly and ask for your free credit report.
The lender who made the decision to decline credit is required to provide you with contact details of the credit bureau that they used to make the decision. Remember, you have the right to ask why you were declined when you check loan eligibility online in the UK. You also have this right when you apply for credit offline or from alternative sources of credit.
If you feel that a lender made a decision based on wrong data, you should certainly ask for contact details and get to the bottom of it. Many people across the UK have incorrect information on their credit report. This bad information could be leading to a bad credit score that you don’t deserve. It can lead to you not getting credit when you need it.
Given the importance of your credit score and credit access, it’s imperative that you check your credit report frequently. If it’s wrong, you are entitled to get in touch with the agency and ask them to fix it. Having an incorrect credit report will result in you not being eligible for credit when you should be. It’s hard not to overstate this- so many people across the UK have a wrong credit report, so there is a good chance yours could be too! There are a number of free services out there to help you do this.
Applying for credit can be a complicated process and there are some things you need to watch out for.
We will assess your eligibility with a few standard checks and evaluate your affordability to ensure you can comfortably manage your loan repayments. To qualify, you must be a UK resident, aged 18 or over, with a stable income (this list is not exhaustive).
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