Taking out a bad credit loan does not always mean that you have bad credit history, in many cases it's because you just have not accumulated enough credit history through any means of borrowing.

For you to successfully apply for a loan the lender has to do a credit check on you and have that approved before they take the risk of lending you the money. This also ensures the lender that you will pay them on time, they will also look through the public records to make sure that you have no court judgements, bankruptcy etc. even simple things like voting counts towards your application.

All lenders keep your information on file and pass it over to the credit reference agencies who are members of GAIN (gone away information network) who are the credit check agents. This is how your credit history is recorded and tracked, all repayments and the time they were repaid is logged by the lender.

If you have been denied a loan by a lender they must by law tell you the main reason for your rejection. If this is a credit refusal then they must inform you of the credit reference agency they used for the check.