Your loan or credit application being denied is not a new thing as loans and credit getting denied happens usually. You had your heart set on that new appliance package from a big box store, only to discover they had a 0% interest for 12-month promotion going on that you just could not pass up. You might press further to filling application and waiting expectantly for their response only to find out your application was denied. There are lots of reasons behind this denial and some of these reasons are discussed below.
Your income is insufficient for the amount requested.
There are standards creditors check before they loan you money for a purchase or grant you credit on a credit card. They do not usually disclose these standards as far as what your minimum income must be before the certain amount can be loaned to you. Your application may be denied or you may be offered a smaller amount of credit if you fall into this category.
Your employment history is too recent or unstable.
In order to have the ability to pay back the money you borrow with interest; creditors like to see and know you have a stable source of income and a longstanding one. Your chance of getting a loan is slim if you do not have a job or you seem flaky with your employment.
You have recent delinquencies on your credit report.
There is a possibility for delinquencies that can lower your score and flag other creditors that you are not a safe risk if you have had any issues or problems with your repayment history on any card or loan reported to your credit. They have no reason to think you would be able to pay them back if you were once unable to pay your obligations. The older the hiccups, the less they impact your score and the more likely a creditor will be willing to look past these issues. However, if it was fairly recent that you faulted, the effect can sink your credit application fast. Even if you are approved, the interest rate will likely be very high to “cover their risk.”
You have a limited credit history or are too young
If your credit history has not been well built as a result of having limited or no credit extended to you in the past, the creditors would not be able to have an idea of how trustworthy you are to lend you the money or not. Your application could however, be denied because creditors will not take the risk on an unknown.
Your credit usage is too high in comparison to the amount of available credit
This is the one that seems to plague a lot of people. If you are using more than 30% (percentage varies for different issuers) of the credit that has already been made available to you, many creditors see this as you overextending yourself financially and essentially living beyond your means. The “house of cards” that credit built will eventually have to fall, making you a risky consumer for them to back with a loan.
You have open collections
There are many reasons people keep collections accounts and credit companies sees that has a delinquency of you not being able to keep up with your financial obligations. They however deny you the loan with the thought of not it been possible they might not be able to collect their money from you.
You can get a copy of your credit report and compare that to the reason you were denied the loan according to the credit company if your loan application was denied. If you find any fraudulent activity in your account, take care of it right away.
If you are unable to get financing, there is always the tried and true method of obtaining what you need and want- pay cash (or debit or check.) If the need isn’t so urgent that you can’t survive without it, build it into your budget and start saving for it. Sometimes you can finagle an even better deal this way, saving on the actual item as well as the seemingly insurmountable interest that can come with financing. Whatever your method, purchase wisely and save that money.