Affordability comes first
By law a provider has to work out what you can afford before it lends. It takes your gross and net income, subtracts your existing debt repayments and your living expenses, and lends against what is left. Lending to someone who clearly cannot afford the repayments is reckless lending, and a court can suspend or set aside such an agreement.
The regulations prescribe how the income is checked. If you earn a salary, the provider asks for your latest three payslips or bank statements showing the last three salary deposits. If you are self-employed or paid irregularly, it asks for three months of bank statements or recent financial statements. For living expenses it may use your own figures, but never less than a minimum set out in the regulations for your income band.
This is why a good credit record does not guarantee a loan. If the money is already committed, the affordability test fails regardless of how reliably you have paid in the past.
Then your credit record
Providers read your record at one or more credit bureaus — TransUnion, Experian and XDS are the largest. The record shows the accounts you have open, how you have paid them over the last five years, anything handed over or written off, judgments, and how many enquiries there have been recently.
Recent matters more than old, and the law limits how long most negative information may be shown. An enquiry stays visible for a year. An adverse listing, such as an account marked as in arrears or handed over, for a year. A civil judgment for five years, or until it is rescinded. Once you settle a debt that was listed or that led to a judgment, the provider must tell the bureaus within seven days, and the bureaus must remove the listing within seven days of that.
You are entitled to one free credit report a year from each bureau. Read yours before you apply anywhere. If something on it is wrong, dispute it with the bureau, which must investigate and come back to you within 20 business days.
And then each provider's own rules
On top of the law, every provider sets its own criteria: a minimum income, the employment types it accepts, how long you must have been in your job, whether it lends to people under debt review, which banks it can collect from, and the amounts and terms it offers.
These rules are why the same person is approved by one provider and declined by another on the same day. They are also why the amount offered can be less than you asked for: the offer follows from the assessment, not from the application form. Matching your situation against the providers' rules before you apply is the whole point of a comparison site.
Some providers also confirm your employment, by calling your employer or using a salary verification service, and some lend only to people paid into particular banks, because they collect the instalment by debit order and need to know it will run on payday.
How long a decision takes
Some providers decide within minutes, using your bank statements and the bureau check; others take a few working days, particularly when they need documents or a salary confirmation from your employer. A provider must check your credit record within seven business days before it approves you, so an approval cannot rest on an old check.
Have your ID, your latest payslips or bank statements and proof of address ready before you apply. Most delays are caused by a missing document, not by the decision itself.
Improving your chances before you apply
Start with your credit report. Correct anything that is wrong, and if an old account is still open with a small balance, settling it both removes an instalment from the affordability calculation and improves how your record reads. Bring every account up to date before you apply: the last twelve months weigh far more than anything older.
Look at your bank statements the way a provider will. Salary deposits that arrive on the same day each month, a balance that does not run to zero before payday and few bounced debit orders all read well. Lots of gambling transactions, cash advances or payday loans read badly, whatever your income.
Ask for what you need, not the most you might get. A smaller amount over a shorter term passes the affordability test more easily, costs less in total and leaves room in your budget for the months that do not go to plan. If the instalment only fits when everything goes right, it does not really fit.
What does not help
Applying to many providers at once. Each application a provider processes leaves an enquiry on your record, and a cluster of enquiries in a short time reads as someone in trouble. Compare first, then apply to the one or two providers whose rules fit you.
Anyone promising approval before seeing your details, or asking for a fee to secure a loan. No registered provider works that way, and paying such a fee is the most common way people lose money while looking for credit. Our guide to loan scams explains how to tell.
If you are declined
Ask the provider why. If you ask, it must give you the main reasons in writing, and if they come from your credit record, tell you which bureau it used, so you can get that report and check it. If the reason is affordability, look at what is committed each month: settling a small account or a store card can change the answer more than a pay rise.
Wait before applying elsewhere, and do not apply for the same amount at several providers in a row. If your record is the problem, our page on loans with a poor credit record explains which lenders may still consider you and what that usually costs.