In this series I am covering the 24 tell-tale signs that you could be in financial trouble. Over the next few weeks I will be presenting these signs, how to identify them and tips on how to address the issue.
If you have recently applied for a loan or line of credit either through a bank or a credit card company and have been turned down, you probably have a problem.
When you are turned down for a loan it means that someone, somewhere, has reviewed your application and found something that tells them that you may not be able to repay the amount that you wish to borrow. This decisions are either based on trained people at a local level or educated guesses based on past credit history and the likelihood of default. It is important to remember that these decisions are not because a company doesn’t like you, they are simply doing their part to lend money to people with the greatest likelihood of repaying.
More Than Credit Score
For some basic credit requests the primary determining factor is your credit score, but not all applications are this simple. Your loan denial may have to do with inadequate income, lack of collateral or even inconsistent employment history. While your credit score is a very important factor lenders take into consideration, keep in mind that these other factors can play an important role in their decision as well.
Find Out Why You Were Denied
If you are denied a loan or credit card you need to find out why. When you receive that letter stating you were not approved there is generally instructions on how to obtain your credit report for free. You are entitled to a copy of your report when you are denied and this is a perfect time to take a look at it if you haven’t in a while. Sometimes the lender will even provide an explanation as to why your application was denied.
If you don’t know exactly the reason why you were denied, take a look at your credit report you just obtained. Review the information very carefully and check it for accuracy. Mistakes can be quite common on these reports and you do have the ability to dispute a valid claim. Your denial may be based solely on inaccurate information shown on your report. This is also a good time to check for strange activity on your report. Identity theft is all too real and it can happen to you. Be sure that every account that is being reported is a legitimate account.
Resolve the Problem
Once you have determined the reason why you were denied it is time to fix the problem. If your credit score is low simply because you have some late payments? Then you need to focus on getting current with everything and continue to make regular payments. Maybe your score is low because all of your credit lines are close to maxed out. In this case you need to work at lowering the balances. Or maybe you just got a new job, moved to a new location and have limited income history. In this case you need to focus on maintaining the debt you do have and work on maintaining your employment or income for a period of time.
Whatever the reason is it is up to you to find out and work to resolve it. Too many people simply get frustrated when they are turned down, get mad at the lender and never take a proactive approach toward determining why they made that decision and what they can do to improve it. It could be just a simple mistake on your credit report or it could be a sign of a severe credit problem. You won’t be able to address the issue until you know what it is.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.