What to Do If Your Loan Is Denied

If you've recently applied for a loan and your application was declined, it may feel like an insult. It's nothing personal, though, and there are several potential reasons for the denial.

To improve your chances of getting approved the next time, it's important to understand why you were denied and how to make the right changes to increase your odds of getting approved.

Understanding Why Your Loan Was Denied

Two primary factors lead lenders to deny loan applications: problems with credit and problems with income. In some situations, however, other factors may also contribute to the decision.

Credit

Your credit history and credit scores are primary factors lenders consider when you submit a loan application. If lenders see any significant negative items on your credit report or other red flags, they may determine that as a borrower, you're too risky to approve at this time.

Common negative items that can cause a denial include:

• Bankruptcy
• Foreclosure
• Collection accounts
• Delinquent payments
• High credit card balances
• Too many recent credit inquiries
• Not enough credit history

You can also be denied if your credit score is lower than the lender's minimum requirement. To prevent this from happening again, make sure you know your credit scores and shop around for loans that are targeted to your credit range.

If you are not approved for a loan, you will receive what's called an adverse action letter from the lender explaining why.

By law, you're entitled to a free copy of your credit report if a loan application is denied. The lender should provide instructions in your declination letter for requesting a free report from the credit reporting company the lender used to make its decision.

If you don't receive these instructions, you can still request your report directly from the credit reporting agency listed on your declination letter. With Experian, for instance, the Report Access page offers instant access to your report through a secure, encrypted connection.

Income

If your lender denies your loan application based on income, two issues are the likely culprits. The first is that your income doesn't meet the lender's minimum requirement. Unfortunately, most lenders don't publish this information, so it's hard to know if your income is high enough to garner loan approval.

The other reason is that your debt-to-income ratio is too high. You can calculate this ratio by dividing your total monthly debt payments by your monthly gross income.

For example, let's say you earn $5,000 per month and have the following monthly debt payments:

• Mortgage: $1,200
• Student loans: $300
• Auto loan: $350
• Credit cards: $150

Your total monthly debt obligation is $2,000, giving you a debt-to-income ratio of 40%. If you applied for a mortgage loan, the maximum ratio to get a qualified mortgage is 43%, but many lenders prefer a ratio of 36% or lower.

With other loan types, the maximum debt-to-income ratio varies by lender. But if yours is too high, it's a sign that the lender believes you may have a tough time keeping up with all your payments.

To improve your chances of getting approved the next time you apply, work on paying down some of your debts.

Other Reasons for Denial

While your credit and income are the primary factors lenders consider, they don't tell the whole story. As such, you may be denied based on other reasons, such as your employment history, residence stability, and cash flow or liquidity problems.

While you may not have a lot of immediate control over some of these issues, take the reasons seriously and wait until you're in a better position to apply again.

Getting Denied Does Not Hurt Your Credit Score

When a lender or creditor asks a credit bureau to look at a consumer's credit report, an inquiry is posted to the consumer's credit report. A credit inquiry can be hard or soft. Almost every time you apply for credit, the lender will run a hard credit inquiry. For most people, a hard inquiry knocks less than five points off their credit score, but that little dip will not last long—24 months at the most.

Approval decisions for loans are made by lenders, not any of the three nationwide credit reporting companies, Experian, Equifax, and TransUnion. Also, your credit report won't indicate whether a loan application was denied, so getting denied won't impact your credit score in any way.

Getting a Loan When You Have Bad Credit

Whether you need money to finance a large purchase, cover living expenses or consolidate debt, it's possible to do so with bad credit.

Specifically, some lenders specialize in working with borrowers with bad credit and have less stringent credit requirements. The catch is that your interest rate will generally be higher than what you'd qualify for with fair, good or excellent credit.

Another way to borrow with bad credit is to get someone with good credit to apply with you as a cosigner. Some lenders allow cosigners to improve your chances of getting approved. Even if you can get approved on your own, enlisting a cosigner with a great credit history can help you score a lower interest rate.

Keep in mind, though, that cosigners are equally responsible for paying off the debt. So if you default, it could damage both your and their credit history.

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What to Do If You Are Rejected for Credit

I don’t know about you, but whenever I’ve been rejected for something — a job, a credit card, even being left out of an event I had hoped to be invited to — my first reaction has been to fume or pout (or maybe both). But I know I can do better.

“Rejection offers us an opportunity to evolve through and learn from our experiences,” says clinical psychologist and author Carmen Harra. “It allows us to look within and say, ‘OK, maybe I can change this’.”

While she was referring to relationships in her article, her advice is relevant for many different types of situations – including, yes, being denied a credit card or rejected for credit in general. In fact, getting turned down for credit can give you an opportunity to improve your credit. Here’s what to do if your credit application is rejected.

Need Credit Repair Help?

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What Should You Look for in a Secured Credit Card?

 

A secured credit card can be a useful tool if you're looking to build a credit history. Since a refundable security deposit is held as collateral with these cards, they often come with more relaxed credit requirements.

But not all secured credit cards are created equal. Some come with better terms and benefits than others. Here are a few factors you'll want to pay attention to as you're shopping for a secured credit card:

Fees

Since some secured cards can be targeted toward borrowers with limited, poor, or damaged credit, some charge expensive annual fees. Additionally, some cards charge monthly "maintenance" fees or other charges that can't be avoided.

If you're someone with heavily damaged credit, it may be worth it to pay a small annual fee for a "no credit check" secured credit card. Otherwise, you'll want to avoid cards that charge fees as there are plenty of no-fee or low-fee options available.

Graduation path

Some of the best secured cards will promise to consider graduating cardholders to partially unsecured (by increasing the credit line) or fully unsecured version (by refunding the security deposit) of the card after a certain number of on-time payments.

For example, one card issuer will consider increasing a cardmember's credit line after just six months of on-time payments. And another card will begin reviewing accounts after just 8 months to see if they can be transitioned to a deposit-free version.

Other secured cards, however, offer no such clear graduation path. With some, in fact, the only way to get back your security deposit may be to close your account (which isn't ideal). When possible, opt for a secured credit card that includes a graduation component.

Deposit amount

By definition, all secured credit cards will require a security deposit. But the deposit requirements with some cards are more manageable than others. According to the CFPB, most secured card deposits range between $50 and $300. So if a card issuer is asking for a larger deposit than that, you may want to keep looking for better options.

Interest rates

Hopefully, you won't ever have to pay interest charges on your secured credit card. But you'll still want to avoid cards that charge exorbitant rates. Compare the current rates of several secured cards to make sure that the one you apply for is near (or below) the average.

You'll also want to make sure that the card you choose has a grace period (a time in between the end of your billing cycle and due date when no interest is charged). And you'll want to stay away from cards that charge penalty APR.

Credit reporting

For most people, the primary reason that they're considering a secured credit card is because they're looking to build a positive credit history. But your on-time payments can't impact your FICO® Scores if they don't show up on your credit reports.

That's why it's critical that you choose a secured credit card that will report your credit activity to all three major credit bureaus. If the card that you're considering doesn't openly advertise its credit reporting policy, keep digging until you confirm that the credit bureaus will be receiving reports on your card activity.

Credit limits

The credit limit on a secured credit card will usually be equal to your security deposit. This means that you'll typically be dealing with a credit limit of $300 or less. To keep your credit utilization rate below 30% on a card with a $300 limit, you'd need to spend no more than $90 per month.

However, some cards will allow you to make larger security deposits as high as $5,000. While having to put up more cash may seem unattractive at first glance, it would also mean a higher credit limit. And the higher your credit limit, the easier it will be to keep a low credit utilization rate.

If you have a large chunk of savings available to put down as a security deposit, it could be worth it in some cases. Also, know that some cards may offer credit limits that are higher than the cash deposit (making it "partially secured" from the start) to borrowers that qualify.

Related: How FICO Scores Look At Credit Limits

What about rewards?

You may have noticed that there was no discussion above about the importance of comparing secured credit card rewards programs. And there's a simple explanation for that—many secured credit cards offer little or no rewards. But if you're in the market for a secured credit card, earning rewards probably shouldn't be your priority anyway

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2. Mrs Catoria Ware
3. @941-210-1189
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New Year's Resolutions for Credit improvement

 The beginning of a new year can be a great time to take stock and set goals that might change your life for the better. If you're not happy with your credit standing at the moment, consider a New Year's resolution to better understand what's impacting your credit. Your credit health is important because it can save you money and open the door to opportunities you might miss out on otherwise.

Of course, everyone's credit situation is unique—like a digital fingerprint. That means figuring out what you need to know about your individual credit situation may require a little research.

Thankfully, some basic credit resolutions have worked well for others in the past. Below are five New Year's resolutions for credit empowerment that may help inspire you to create your action plan for the upcoming year.

1. Resolve to be informed.

The first step is to know where you stand. That's why it's wise to check both your FICO Scores and your three credit reports—and to do so often.

You can conveniently review and monitor your FICO Scores alongside your credit reports through the myFICO website. Seeing your reports and scores side by side can help you discover how the different information on your credit reports affects your FICO Scores.

Thanks to the Fair Credit Reporting Act (FCRA), your free credit reports are available to claim once every 12 months from all three credit bureaus as well. (Note: You can claim free weekly reports through April 2021 in response to the coronavirus pandemic.) To access your free reports, visit AnnualCreditReport.com or complete and mail in an Annual Credit Report Request Form.

2. Resolve to correct credit reporting errors.

Once you download your three reports, you should take the time to go over them in detail. Be on the lookout for any problems like accounts that don't belong to you, negative information that's been on your credit report for too long, or account details that just don't look right. Negative information on a credit report, especially if it's incorrect, has the potential to damage your credit score.

3. Resolve to pay on time.

There are many factors on your credit reports which can influence your FICO Scores. But the information that has to do with your payment history is the most important. Payment history affects over one-third of your FICO Score—35%, to be precise.

One way to set yourself up for credit success is to make a habit of paying your bills on time.

4. Resolve to tackle your credit card debt.

The debts you owe can often have a significant impact on your FICO Scores—especially credit card debts. Credit utilization, defined as the percentage of your available credit card limits in use when your score is calculated, is an important factor that scoring models consider when evaluating your credit risk. When your credit card limits are close to maxed out, your credit utilization will be high. This could hurt you where your scores are concerned.

As a rule of thumb, you should aim to keep your credit card balances low. If you can pay your full statement balance off each month, you may protect your credit scores and will likely avoid paying expensive interest costs as a bonus. But if you owe a lot of debt and can't afford to pay it all off at once, even small steps toward reducing your credit card balances (and hopefully your credit utilization rates) might benefit you.

It's worth mentioning that the credit card balance that appears on your credit report may be different than your current account balance. Many credit card issuers only update your account information with the credit bureaus once a month. Often (though not always), it's the account balance from your last statement that appears on your report. So, if you're trying to lower your credit utilization rate, it might be helpful to pay down your credit card balance before the statement closing date on your account.

5. Resolve to shop around for the best credit

Make sure you're shopping around to get the best deal based on your FICO Score.

If your FICO Score changes, there's a chance you might qualify for financing and services that were out of reach for you in the past. For example, if your FICO Score moves from a "fair" rating to a "good" rating, you might be able to qualify for loans or credit cards that you weren't eligible for previously. A different FICO Score might also help you qualify for housing leases and other perks. And don't forget that changes in your credit can impact interest rates and insurance premiums.

Want to see how much money a higher FICO Score might save you? Check out the myFICO Loan Savings Calculator. This free tool can show you how your FICO Scores can affect the interest you pay on certain types of financing. Reviewing your potential savings opportunities can be a great way to stay motivated as you work hard to reach your New Year's credit resolutions.

1. For all your credit repair answers contact
2. Mrs Catoria Ware
3. @941-210-1189
4. Or visit
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More tips on how to fix your FICO Score & maintain good credit:

• If you have been managing credit for a short time, don't open a lot of new accounts too rapidly: new accounts will lower your average account age, which will have a larger impact on your scores if you don't have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.

• Do your rate shopping for a loan within a focused period of time: FICO Scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which you make your inquiries.

• Re-establish your credit history if you have had problems: opening new accounts responsibly and paying them off on time will raise your credit score in the long term.

• Request and check your credit report: this won't affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.

• Apply for and open new credit accounts only as needed: don't open accounts just to have a better credit mix—it probably won't raise your credit score.

• Have credit cards but manage them responsibly: in general, having credit cards and installment loans (and making your payments on time) will rebuild your credit scores. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.

• Note that closing an account doesn't make it go away: a closed account will still show up on your credit report and may be considered when calculating your credit score.

1. For all your credit repair answers contact
2. Mrs Catoria Ware
3. @941-210-1189
4. Or visit
5. http://www.lineofluxurycreditrepair.com

 

How to repair your credit and improve your FICO® Scores

  

You can improve your FICO Scores by first fixing errors in your credit history (if errors exist) and then following these guidelines to maintain a consistent and good credit history. Repairing bad credit or building credit for the first time takes patience and discipline. There is no quick way to fix a credit score. In fact, quick-fix efforts are the most likely to backfire, so beware of any advice that claims to improve your credit score fast.

The best advice for rebuilding credit is to manage it responsibly over time. If you haven't done that, then you'll need to repair your credit history before you see your credit score improve. The following steps will help you with that.

Steps to improve your FICO Score

1.  

   Check your credit report for errors

   Carefully review your credit report from all three credit reporting agencies for any incorrect information. Dispute inaccurate or missing information by contacting the credit reporting agency and your lender. Read more about disputing errors on your credit report.

   Remember: checking your own credit report or FICO Score has no impact on your credit score.

2.  

   Pay bills on time

   Making payments on time to your lenders and creditors is one of the biggest contributing factors to your credit scores—making up 35% of a FICO Score calculation. Past problems like missed or late payments are not easily fixed.

   • Pay your bills on time: delinquent payments, even if only a few days late, and collections can have a significantly negative impact on your FICO Scores. Use payment reminders through your banks' online portals if they offer the option. Consider enrolling in automatic payments through your credit card and loan providers to have payments automatically debited from your bank account.

   • If you have missed payments, get current and stay current: poor credit performance won't haunt you forever. The longer you pay your bills on time after being late, the more your FICO Scores should increase. The impact of past credit problems on your FICO Scores fades as time passes and as recent good payment patterns show up on your credit report.

   • Be aware that paying off a collection account will not remove it from your credit report: it will stay on your report for seven years.

   • If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor: this won't rebuild your credit score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. Seeking assistance from a credit counseling service will not hurt your FICO Scores.

3.  

   Reduce the amount of debt you owe

   Your credit utilization, or the balance of your debt to available credit, contributes 30% to a FICO Score's calculation. It can be easier to clean up than payment history, but it requires financial discipline and understanding the tips below.

• Keep balances low on credit cards and other revolving credit: high outstanding debt can negatively affect a credit score.

• Pay off debt rather than moving it around: the most effective way to improve your credit scores in this area is by paying down your revolving (credit card) debt. In fact, owing the same amount but having fewer open accounts may lower your scores. Come up with a payment plan that puts most of your payment budget towards the highest interest cards first, while maintaining minimum payments on your other accounts.

• Don't close unused credit cards as a short-term strategy to raise your scores.

• Don't open several new credit cards you don't need to increase your available credit: this approach could backfire and actually lower your credit scores.

4. For all your credit repair answers contact
5. Mrs Catoria Ware
6. @941-210-1189
7. Or visit
8. http://www.lineofluxurycreditrepair.com/