Your Rights When Applying for Credit with a Low Score in the UK
Yes, applying for a loan with bad credit may prove overwhelming. It may turn out sensitive if you don’t follow the rules. Understanding your loan options, the approximate amount you may get, and the aspects that may affect the application is important.
At the same time, you must know your rights. It will help you avoid fraudsters and help you get a loan truly made for you. It should be something that helps you meet present needs without affecting your basic expenses and financial obligations. The blog lists some rights that you may rationalise.
Rights you are entitled to as a bad credit applicant
When you start a credit application with bad credit, it may feel like an immediate disadvantage. There is a huge discretion among loan providers when offering a loan to individuals. However, law and regulation grant certain rights to ensure fairness, customer empowerment, and provide an opportunity for building credit.
You can exercise these rights whether you got the loan or not. The tips below explain the actions you may take when applying for a loan with a low credit score. It also sheds light on the stand you can take if things go south.
No “right to credit” but protection
Applying for a loan or passing a preliminary credit check does not guarantee approval. No lender is required to approve your application in any situation. You will only get the loan if you can afford the payments. This ensures you get a responsible loan and terms. It also protects you from financial distress.
Get transparent pre-contract information
Yes, you have the right to get a transparent loan structure with all the costs. It is according to the Consumer Conduct Act of 1974 and subsequent FCA conduct. Thus, you should know every if and but of the loan application. It is important when you seek instant decision loans for bad credit scores.
- The total cost of the loan
- The interest rates and associated costs
- The repayment schedules
- Other terms and conditions that the specific loan company charges.
All these aspects help you decide whether the loan is right for you. It tells you the chances and potential you must afford the loan payments. Alternatively, if you don’t get clarity on terms, the respective loan company cannot enforce a court order if you fail to pay the dues.
Check credit score via agencies
Yes, you can analyse your credit score by getting different credit reports from agencies like Experian, TransUnion, and Equifax. Each agency uses different parameters to assess the credit score.
Thus, it may help you understand the delinquencies, the errors, and aspects that may affect the loan approval. For example, if you have too much credit card debt, pay it all off once. You can do it with a debt consolidation loan. It is the fastest way to increase credit utility space and improve your credit score.
Getting a credit report does not affect your credit score. However, it may take some time, like 20-30 days, to get one.
Can legally ask the reason for loan refusal
You share all the rights to demand an explanation from the loan provider over the loan rejection. Identify why you were refused credit. You can ask the following questions :
- Which credit agency did you refer to?
- What is the main reason behind the loan refusal?
Although loan companies are not obliged to provide a detailed explanation. But the legal ones may help you know the reason and even the ways that may help you improve approval chances. Some may even tell you the reference data and how to get it.
Right to responsible lending and treatment
Loan companies must conduct affordability checks to determine whether you can afford the loan. If not, they must not provide the loan. These assessments consider your income, expenses, and ability to pay the dues without difficulty. They cannot ignore your financial reality.
Responsible lending requires that the loan company not extend credit that may impact the financial well-being of the borrower. If the company cannot carry out adequate financial checks and you suffer financially as a result, you can complain and seek redressal of the issue.
If something goes wrong
If you believe that the loan company has treated you unfairly, you can complain. It could be in any way – misleading advertisements, 100% guaranteed loan promises, or the loan terms. You may also complain if the firm does not carry out adequate credit assessments.
If the loan company fails to address and resolve the complaint within 8 weeks, you can escalate it to the Financial Ombudsman Service (FOS). It is an independent dispute resolution authority that may help you; you may get compensation, improve your record, or take remedial actions.
How to exercise your rights impactfully?
Here is how you can make the most of your loan rights:
Improve your credit before applying
Repair and report the issues affecting the credit score unnecessarily. Work on pending debts, incomplete information, and bad credit alliances. You can also add explanatory notes if necessary. Countering this helps you witness a quick jump in your credit score. It improves your chances of getting a loan.
Pre-qualify before finalising the quote
Exploring options helps you determine the amount and terms you may get. Pre-qualification is the best way to check this. It is because it does not affect your credit score. Instead, you can determine the amount, term, and interest rate you may qualify for, given the financial and credit circumstances. It also helps you know with whom you are most likely to be accepted for a loan.
Don’t ignore affordability
If a loan company fails to adhere to the standard law of conducting assessments, complain about it. You can legally do that and thus safeguard your finances.
Bottom line
These are some of the basic rights that individuals with bad credit may tap while seeking a loan. It helps you ensure and get a responsible loan that does not affect your finances and budget. Moreover, an informed loan helps you budget wisely and avoid missing any loan payments. It instead encourages you to navigate the possibilities of boosting your credit score.
