What To Do When Lenders Reject Your Loan Application

If you have bad credit — or even if it just needs a little bit of work — you might feel like lenders will never accept your application for a credit card. If you’ve received a rejection letter for either a credit card or a loan, several ways can help you learn why. Understanding why a lender rejected your loan can create a plan to improve your chances and avoid behaviors that can diminish your likelihood further.

Learn what borrowing options you have, which ones that are worth pursuing, and which ones you should avoid. 

What Lenders Should Tell You If They Reject Your Borrower Application

If a lender rejects your application for a credit card or loan after performing a credit check, they will send you a letter in the mail informing you of their decision and which credit bureau they checked. 

After that, you can request your credit report from the agency the lender used. You can order your report for free from all three bureaus by visiting annualcreditreport.com or calling 1-877-322-8228. 

If the lender did not specify why they turned down your application, you could also ask them. However, keep in mind that lenders are not required to provide in-depth reasoning.

When you receive your credit report, check it for any mistakes. If you notice an error, contact the credit bureau right away to resolve it. Be prepared to detail why the mistake is wrong and offer proof. While the agency works to fix the issue, it will label the error as “disputed.”

Don’t Submit Another Application

If a lender refused your application for a credit card or loan, be careful about your next move because it could negatively affect your chances of approval even more. That’s because whenever you apply for a line of credit, it appears on your credit report — whether you are accepted or not.

It looks bad when you submit multiple applications in a short time frame because it gives lenders the impression that you have a dire need for cash. Not only that, but repeated credit checks can hurt your credit score, further impairing your ability to get a loan and an affordable interest rate.

So What Do I Do?

Your next step depends on the reason you need a line of credit. 

If You Need A Loan To Repay Other Debts…

If you need a credit card or personal loan to repay outstanding balances, bills, and assorted costs of living, then you should consider speaking to a free debt advisor. These experts can help you create a debt relief plan and avoid further debt. 

If You Need A Loan To Cover A Purchase And Can Afford Monthly Payments…

If you need to borrow money to afford a big-ticket purchase like a home, car, or something similar and can afford monthly payments, you should check your credit score. Your score plays a big part in how likely the lender is to approve your application. As mentioned above, you can order your credit report for free, either online or over the phone.

However, if a lender has already rejected your application once (or perhaps several times), you might want to rethink your financial situation before moving forward with a large purchase. If you already struggle to make monthly payments, you should address it with a professional. You can talk to your financial institution or find resources in your area. 

If you don’t have any debt, you should consider creating an emergency fund before applying for a loan. 

Other Lending Options For Poor Credit

If you have to take out a loan or get a credit card and can afford to pay the monthly payments, you have a few options. 

Credit unions are one alternative. They are non-profit, member-run financial institutions that act in the interest of its members. As a result, they often have more affordable interest rates than banks and no hidden fees or penalties for early repayment. However, before you can apply, you must become a member and build savings. 

Aside from credit unions, there are few other options that don’t put you at risk of falling into a cycle of debt. These include payday loans, doorstep lenders, pawnbrokers, and loan sharks. If you absolutely need to get a loan, you might consider asking someone to either lend you the funds or co-sign on the loan.



  • “Free Credit Reports.” Consumer Information, 30 Jan. 2020, www.consumer.ftc.gov/articles/0155-free-credit-reports.
  • “Refused Credit or Refused a Loan – What You Can Do.” Money Advice Service, www.moneyadviceservice.org.uk/en/articles/what-to-do-if-you-have-been-refused-a-loan-or-credit-card.