Loan rejected: what now

A rejection is one lender’s decision on one application. Start by finding out why, then check what your records say about you and correct anything that is wrong. Only then decide whether to try again, borrow less, or talk to a debt advice service first. Don’t send applications to several lenders at once in the hope that one says yes: ZEK members report credit requests, and a request turned down for reasons about you stays in the ZEK database for 2 years.

Why lenders say no

Every lender that grants consumer credit as a business must check, before you sign, that you can afford the credit (KKG Art. 27a). The test is set in the law (KKG Art. 28):

• You must be able to repay the credit without using the part of your income that can’t be seized in debt collection, your Existenzminimum (minimum subsistence level), worked out with the guidelines of your canton.
• The lender must count your actual rent, your taxes according to the withholding tax table, and the credits you already have that are recorded at the IKO (Informationsstelle für Konsumkredit, the information office for consumer credit).
• It must assume the credit is repaid within 36 months, even if your contract runs longer.

So one reason for a no is set by the law itself: the payment would not fit your budget under these rules. Because of the 36-month rule, asking for a longer term does not change that on its own.

Beyond the law, lenders set their own rules. The Act says nothing about residence permits or a minimum income, and on age it sets only one rule: under 18, a contract needs the written consent of your legal representative (KKG Art. 13). So limits differ from lender to lender, and the same application can get a no at one and a yes at another.

A lender may also look at your records: your entries at the ZEK (Zentralstelle für Kreditinformation, the central office for credit information), your debt collection record, and sometimes data from private credit agencies. The Federal Data Protection and Information Commissioner (FDPIC) explains that if such an agency registers you as not creditworthy, or gives you a low score, a firm may refuse you a contract.

Ask for the reason

The Consumer Credit Act has no rule that makes a lender tell you why it said no. Data protection law gives you two rights that help:

• Your right of access. You can ask the lender whether it processes personal data about you, and receive that data, the purpose, where the data came from, and whether an automated individual decision was taken and the logic behind it. The answer is free, with some exceptions, and is in general given within 30 days (FADP Art. 25).
• A person can review a machine’s decision. If the decision was taken by automated processing alone and has a considerable adverse effect on you, the lender must tell you. You can then give your point of view and ask for a person to review the decision (FADP Art. 21). This does not apply if you explicitly agreed to an automated decision.

Ask in writing, and keep a copy. Even a short answer, such as «existing commitments too high» or «entry in the debt collection register», tells you where to look next.

Check your records

Order your own records, so you see what a lender sees. Each is easy to get.

The FDPIC adds that if an agency rates you with a score, it must in principle also tell you the logic behind it. Our guide ZEK and IKO explained shows how to order both extracts, and what lenders check explains each record.

If an entry is wrong. At the ZEK and the IKO, the member that reported the entry is responsible for it. Both offices say the simplest way is to contact that member and ask for a correction; your extract names it. If you can’t agree, write to the office by post with your documents. An entry is deleted early only if it is wrong. For a private credit agency, you can ask for wrong data to be corrected, and you may act against the agency, the firm that supplied the data, or both (FDPIC).

How long a refusal stays on record

ZEK entries are deleted automatically on the weekend after their period ends (ZEK). For private credit agencies, the FDPIC explains that the data they use to assess creditworthiness may not be older than ten years.

Before you apply again

• Fix the cause first. Correct a wrong entry, settle what you can, or wait until a credit you are repaying has run down. If the payment did not fit, a smaller amount may, and a longer term on its own will not.
• Give accurate figures. The lender may rely on what you tell it, but if it doubts your figures, it must check them against documents (KKG Art. 31).
• Don’t apply everywhere at once. ZEK members report credit requests, and when they do, they receive the entries already held about you. A string of recent requests and refusals is what the next lender sees.
• Ask the lender when to try again. Each lender has its own view.
• Be careful with offers aimed at people who were turned down. Swiss Crime Prevention (SKP) warns that people refused by serious lenders often end up with rip-off firms, or with fraudsters who offer loans without any credit check and ask for money up front. Read loans «without a credit check»: what’s true and spotting loan scams. If you have a Betreibung, getting a loan with a Betreibung explains what lenders look at.

When a no is a signal

The credit check exists to keep you from becoming over-indebted (KKG Art. 22). If the answer was no because the payment does not fit your budget, that is worth taking seriously, especially if your bills are already hard to pay.

Non-profit debt advice services advise people who risk falling into debt or are already over-indebted. Schuldenberatung Schweiz lists them by canton and runs a free hotline on 0800 708 708, Monday to Thursday from 10.00 to 13.00 (schulden.ch). With your consent, a debt restructuring service named by your canton can also see your IKO data for your case (KKG Art. 24). Our guide debt help in Switzerland explains the options.

If Swizeo says no

A person on our credit team makes every loan decision. A no comes with the reason, as far as the rules allow, and a next step.

Next step

Check our requirements, with the reason for each one, on the personal loan page before you apply again. If one of them rules you out, better to know now.