Why are Unsecured Loan Applications Turned Down?

Stats reveal that unsecured loan applications are turned down very frequently. The reason to support is that an unsecured loan is granted by the lender on the basis of the creditworthiness of the borrower. All the FISA lending companies use one or more credit reference agencies to get a report on the credit history of the borrower. On the basis of this and their own credit policies, they decide whether the borrower should be granted or rejected the loan.

What are credit reference agencies?
Credit reference agencies provide factual information on details of credit agreements, arrears and defaults on credit; records on county court judgments and bankruptcies; and electoral role (also known as the voters roll) information of the borrower. They also retain information relating to the previous and existing records of the customers. These agencies do not keep "blacklists", nor do they give any opinion about whether or not an unsecured loan should be granted to a particular borrower.

The main credit reference agencies in the UK are Experian Limited and Equifax Plc.

Why are applications on unsecured loans being turned down?
Once the Credit reference agencies give their report on a particular customer, the lending institution makes its own calculations on the basis of the credit report and their own criteria. Unsecured loans can be rejected if the borrower-

has a poor credit score

has too many arrears and defaults in his past repayment record

has done fraud by providing wrong information to the lender and the credit reference agency discloses this

has suffered bankruptcy recently

is suffering from a CCJ at present

has changed his job too frequently

often changes his residence

has a criminal record

has declared himself insolvent recently

doesn't have a good DTI (debt to income) ratio

If your unsecured loan application has been turned down by one lender, it is not necessary that it'll rejected by others too. Every lending institution varies in respect of its credit policies. Some lenders also ignore your credit history and grant you an on the basis of other factors like the DTI ratio, homeowner status, etc.