Mortgages.scot

This article responds to many questions I get about declined mortgage applications. The question below is not a specific question received but a collection of questions with the same theme. I can't give a particular answer to why, in any case, a lender has refused an application, but it isn't usually difficult to understand why.

A mortgage lender has declined my application. But they refuse to tell me why they are declining it. If they don't tell me, how can I fix whatever is causing the issue?

Lenders usually do give a reason

It's important to understand that most, if not all, lenders will indicate why an application is being declined. In most cases, decline reasons can be categorised into three main areas.

• Affordability
• Credit Score
• Lender Criteria

If the reason is related to affordability, they may lend to a borrower but not at the requested level; they will usually be clear about that, explain where the issue is, and, where possible, offer a solution. That solution may be to increase your deposit by £x amount.

Where the reason is related to poor credit history, they should also tell you that is the reason and that you should go and check yourself.

They usually won't give you much information if you have been declined due to lending criteria.

When lenders won't give you specifics

There are several reasons why a lender will not offer more than a general, non-specific reason for declining an application.

On point two above (Credit Score), all they are going to do is tell you something in your credit report has caused the issue. They will tell you who is providing that information so you can go and check with them. Equifax, Experian or Call Credit are the usual credit reference agencies (CRA) they use. Why won't they tell you what they found? This is about contracts with the CRA. Lenders can search for agency information, but there is always a clause in their contract that states they are not permitted to share that information with the borrower directly. The borrower must contact the agency and ask for their report.

Regarding a decline due to the lender's criteria, they are unlikely to give you specifics as each lender's criteria is not public information. They don't want borrowers to know the details of their lending criteria to prevent them from using that information to their advantage. If you know the lender's specific policy details, that may alert you to the fact you won't get approved and may result in some borrowers changing the information on their application to avoid that specific part of the lender's criteria.

Is there anything you can do to improve your chances of success?

Yes, in some cases. As a first step, look at my Affordability guide here. That will help any borrower understand the process in general and what can impact an application.

When it comes to credit scoring, you can help yourself by running a credit search before making any mortgage application. Clear Score is a good, free service. I have an article about it here. If there is anything on your report, such as arrears, CCJ or anything else, then don't think your lender will somehow miss it. At the time of application, please explain what is on your credit report and why it's there. If you have resolved it, offer a reason for it being there and why it's no longer an issue. Due to COVID and the cost of living crisis, lenders are more flexible on past credit issues as long as you can prove to them that whatever occurred in the past did so for a reason that no longer exists and is therefore not going to impact the ability to repay a mortgage going forward.

In my experience, 98% of borrowers know when making a mortgage application that something may cause a lender issue. Most hope it simply won't come up, so they say nothing. That is not the approach you should take.

Ask in writing if necessary

If a lender declines a mortgage application and offers no reason, you should write to their complaints department and ask for more than nothing. Even if they don't give you specifics, they must indicate where the application failed. The only time I have been in a position of offering no information to a client about why an application is declined is when fraud is involved; in that case, expect contact, just not from the lender!

If the event you have a lender whose communication is simply poor and they are not handling your request with any care or empathy, then you may need to force their hand and complain to the Financial Ombudsman Service FOS. Whilst not ideal, for those who genuinely have no idea why they would fail a mortgage application, it's crucial to understand why and whether other lenders will make the same decision.