When you’re hoping to take out a loan, but your application is denied, you probably feel disappointed. You may even feel like you’ve been personally rejected, especially if you thought your credit was in good shape. Instead of dwelling on feelings of rejection, say to yourself, “My loan application has been rejected. Now what?”
Reasons Loan Applications Are Denied
Loan applications are denied for a wide variety of reasons. If you’ve had credit problems in the past, such as late payments, collection accounts, bankruptcy, or foreclosure, a new lender may be reluctant to take the risk of loaning you money. They may also be reluctant to loan money to you if you’ve never borrowed money and don’t have a credit history at all.
Creditors may have a minimum credit score, and if your score falls below their minimum, they may reject you without any further consideration. Other reasons for denial include having too much debt, too many recent credit inquiries, or an unstable employment history.
Improving the Chance of Acceptance
There are a couple of things you can do right away to improve the chance of acceptance. If you have a friend or relative that’s willing to co-sign your loan, you may have a better chance of being approved. However, many people aren’t willing to take this step since the co-signer is responsible for paying the loan payments if you don’t meet your obligations.
Alternatively, the lender may be willing to loan you a smaller amount of money than you originally requested. You can also shop around for a loan through a different lender since each company has its own criteria for approving loans.
Things to Work on
If you’ve had some credit problems, it may help if you take several months to work on improving your credit before you try again to apply for a loan. Catch up on any past due payments. The more time that passes between the time a negative item shows on your credit report and the date of your application, the less impact it will have.
Work on paying down your debt and try to bring your revolving accounts to a balance that is less than 30 percent of the available amount. If the problem is not having a credit history at all, apply for a secured credit card to start building a credit history. See if you can become an authorized user on a family member’s credit card account.
Checking Your Credit Report
People are sometimes denied credit because of an error in their credit reports. Before you try to get a new loan, check your credit report to make sure there isn’t any incorrect information on it such as incorrectly reported late payments, wrong balances, or accounts you don’t recognize.
If you need help disputing errors, consider partnering with Dovly. Correcting errors on your credit report can’t get easier than it is with Dovly’s help. Dovly is an automated credit repair engine that can help you track, manage, and fix your credit. Try it risk free with our free membership tier. Get in touch with Dovly today.