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Help! My credit application was declined

10 October 2022
5 minute read
Serious couple looking at documents

Your heart sinks when your application for credit is declined. Here are 10 reasons why you might have been turned down and how you can qualify for future applications.

1. Information is missing or the application form is incomplete

Many applications are declined simply because sections of the form are not completed, the form is not signed, or information requested such as a copy of your ID or payslip is not attached or uploaded.

This is easy to avoid and fix! Simply check your application thoroughly before submitting and ensure all requested documentation accompanies it. You can also check with the credit provider if they have all the information they need if you have not heard whether your credit has been granted or not.

Very important: Do not give your original ID documents to a credit provider. It is illegal for a credit provider to take your ID documents. Copies yes, original documents no!

2. Your credit score is too low

Your credit score is calculated according to how you manage your existing credit and how you managed your credit in the past. Some companies will have a cut off point, for example a credit score of 350 may indicate a poor credit record and result in your application being automatically declined.

Your credit score is based on your behaviour with credit over time. You can improve it by paying debts on time and paying down your debts.

3. Your credit record has adverse reports

Your credit record is a comprehensive record of your debts. It shows how much debt you have and if you have made any late payments or missed payments for each debt, or have judgments for unpaid debts. Credit providers use this information to see how you manage credit and whether or not you can afford credit.

If your credit record shows several late and/or missed payments credit providers may be reluctant to give you credit. These usually indicate you are struggling to pay your debts or are irresponsible when it comes to managing your debts.

Credit providers like consumers who pay debts on time, so always, always try and do this. It will improve your credit record and your credit score! If you do miss payments and are able to make them up, make a note when this happens and why so you can explain when the credit provider asks or uses it as a reason to decline your application.

You may also have a flag on your credit record showing you are over-indebted and in debt review. If you have exited debt review (well done!) you will have a clearance certificate to show your debts are paid and the flag on your credit record can be removed.

4. You have too much debt

Credit providers cannot, by law, give you credit that you cannot afford. This is known as reckless lending. It means that if a credit provider looks at your income, your credit record and the amount of debt you currently have, and finds that you are over-indebted and won’t be able to pay for new debts, they have to decline your application. This is tough, but it is done to prevent you from becoming too indebted.

5. You have recently requested credit or taken on a lot of new debt

This will reflect on your credit record. Lots of new debt or requests for credit can indicate that you are in financial difficulty and may find it difficult to make payments on time going forward. It may also indicate that previous credit applications have been declined, which is a warning sign you will have problems paying debt going forward.

6. You have no credit record

This can be tricky, because to show you can manage credit well you need to have credit! You can build a credit record by taking a store card or credit card with a low credit limit or even a cellphone contract, and using it responsibly by paying the amount due, a little more, or total amount outstanding, each month. This will build your credit record. Another option if you have no credit record is to insure your debt with credit life cover, which your credit provider should offer.

7. Your income is irregular or insufficient

Salary slips are great when you apply for credit because they show you have a steady income. Many South Africans don’t have salary slips because they are freelance workers, gig workers or self-employed. Not having a salary slip doesn’t mean you can’t get credit. Credit providers need to know you have an income stream that will allow you to pay your debts when they are due. You can use bank statements, usually for three consecutive months, or an annual income statement, to show your earnings.

8. Your ID has been used by a criminal to run up debts in your name

Unfortunately, criminals target individuals, steal their identity and use these details to run up accounts and debts as well as buy things in your name. If you start seeing unexplained amounts on your statements, or receive calls and SMSs from credit providers you don’t know, or requests to pay amounts you know nothing about, report it to the South African Fraud Prevention Services who will help you open a case of identity theft. Keep any records you have of any strange or suspicious transactions so you can use these as proof of the ID theft.

You can reduce your chances of ID theft by always setting up payment notifications for your accounts, checking your statements at least once a month, and checking your credit record.

9. Your accounts have been frozen

If you have been a victim of fraud, or there is suspected fraud on your account, it may be frozen, which will show on your credit record and need to be explained. If this is temporary credit providers should be able to grant you credit if you meet all other criteria.

10. You are in debt review

You cannot take on any more credit if you are in debt review. Your credit record will show this, and credit providers will have to decline any credit applications.

Take action!

Although it can be extremely stressful to have an application declined, registered credit providers have to tell you why they are declining an application according to regulations laid out in the National Credit Act. If they don’t tell you why, ask!

Top tip: Take a financial education course, such as the course from Truth About Money, to help you understand more about money and debt, and how to use it responsibly.

Use credit wisely

Credit can be used to grow your wealth if you manage your budget and expenses well. It’s a great financial tool to have.  Just make sure you use it wisely and avoid becoming over-indebted!

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