Figure Out Why
Your first step should be to determine why you were turned down for a loan in the first place. There are all sorts of reasons why people get denied credit and there may be something you can do about it.
Pull Your Credit
Pulling your credit report will let you know if you meet the minimum credit requirements of your lender. You might think that you have a good score, but it could be drastically less than you think. It is also entirely possible that there are errors on your report. The credit system is vast with a lot of information, so errors do happen.
Check Your Application
If your credit report comes up clean, double check your loan application. Your denial could be something as simple as an error. Maybe you left off a digit from your income, failed to answer a question or simply checked the wrong box. Not every lender will be diligent in double checking applications, so the proof reading duty is yours.
Review Your Request
A good debt to income ration will make or break your loan application. You have to consider what this ratio is now and what it would be with the new loan added to it. Perhaps you simply asked for too much money.
Apply Again
If everything checks out or if you find something that can easily be fixed, it may be a good idea to apply for another loan right away.
Multiple inquiries in a short amount of time are generally considered a single loan request. This will keep your credit score from dipping under the weight of multiple hard credit pulls. If you still need the loan and feel like the same lender or another lender will approve you, go ahead and apply again.
Improve Your Odds
If you determine that you will not be able to get a suitable loan at the moment, your thoughts should turn to improving your odds of approval. There are various ways to do that.
Improve Your Debt To Income
If debt to income was the most likely problem, you need to figure out a way to improve it.
The simplest way to do this is to adjust how much you request to borrow. If you were looking for a personal loan for $20,000, maybe a loan for $10,000 is a better fit to your current level of debt. Should the lower amount be acceptable, this might be the route to take.
But what if you need the full original amount that you requested? If this is the case, your only option is to pay down your debt. Make a plan to pay off your debt and then put it into action. The best target for you should be high interest credit cards, but paying down installment loans is another possibility. Just keep in mind that the actual elimination of an installment loan can negatively affect your credit due to it harming your credit diversity. If you only have one open installment loan and need additional credit, closing that loan may do more harm than good.
Fix Your Credit
By far the most common reason that people get denied credit is a poor credit score. Luckily, this can be fixed but it may take time.
Your credit score is no big mystery an the two biggest factors that affect it are on time bill payments and available credit. So, pay your bills on time and get those credit cards paid down.
If the problem with your credit is late payments, you should start seeing improvements in your score in 6 to 12 months. If high credit utilization is the culprit, your score could improve much faster if you are able to rapidly pay off debt. As soon as credit card companies report to the bureaus, your score will rise.
Choose A Different Lender
If you are applying with a local bank or credit union, you will have to meet more stringent requirements. These institutions are usually fairly strict with their requirements with no wiggle room. Finding another lender might be the solution.
Online lenders, for example, are often more flexible. Many online lenders even offer cash loans to those with credit problems. Keep in mid that these loans will be more expensive, so make sure that the benefit is worth the higher cost.
