If you've been refused a loan or credit, or you're worried that you might be, you can check the information that's kept about you. If it's wrong, you can ask for it to be corrected.

How lenders decide whom to lend to

Lenders want to know that you're going to be able to repay any money they lend you. The 2 key ways they may use to assess this are:

• Working out your 'credit score' by asking you a series of questions
• Checking your 'credit history' with a credit reference agency.

Credit scoring

Lenders will calculate your credit score from information about you, such as:

• Your income
• Your expenses
• Major things you own – like your home
• Any other loans you've got.

If you don't score enough points, they may:

• Refuse to give you a loan
• Offer to lend you a smaller amount
• Charge you a higher rate of interest.

A lender won't usually tell you why they've refused you a loan, but they may give you a general idea if you ask them.

Can you ask them to reconsider?

You can ask them to reconsider if:

• They made their decision just using a computerised credit scoring system
• You've got information that might make them change their mind.

Applying to different lenders

Lenders score customers in different ways, so you can try again with another lender. But bear in mind that each application will be noted on your 'credit file' kept by credit reference agencies. Too many refused applications will have a negative effect on your credit history.

Credit reference agencies

Credit reference agencies hold information (called a 'credit history') on most adults in the UK. This information helps lenders assess the risk of lending to particular people, and reduces the risk of fraud.

The main agencies are Experian, Equifax and TransUnion (formerly Callcredit).

Your credit history will be compiled by the credit reference agencies from several sources of information about you, including:

• The electoral register
• County Court judgments
• Bankruptcy orders
• Other lenders – to check that you've kept up to date with other loan repayments
• Details of house repossessions.

Your right to check your credit file

You can't stop lenders checking your credit file, but the law says you can see what's on it. You can request your free Statutory Credit Report from each of the 3 main agencies (though they may charge for extra copies). There are also other free services available online for giving you access to your credit score and credit file, one of which is ClearScore.

Be aware that, as well as the free statutory report, some sites offer you more comprehensive reporting services on a paid-for subscription basis. If you sign up with one of these sites, make sure you cancel before the end of the free trial period, unless you wish to start paying a monthly amount for their service.

Getting incorrect information removed

You have the right to have information on your credit file corrected or removed if it's wrong (but not just because you don't like it). The credit reference agencies will tell you how to do this.

Some commercial 'credit repair' companies offer to remove information from your file to 'clean' it. The Financial Conduct Authority warns against using them – it's best to get in touch with the credit reference agencies yourself.

Credit refused due to identity theft

You could be refused a loan because your credit file shows that you haven't kept up the repayments on a loan you didn't even know about. This can happen if someone's stolen your identity and applied for loans or credit cards in your name. See If you're a victim of identity theft for more information on how to deal with this situation.