Potential Loan Problems
Loans are turned down for a variety of reasons, but some of them certainly stand out more than others. Let’s take a look at the big reasons for loan denial and see how many may apply to you. Then, we can look at ways to overcome these problems.
1) Too Many Outstanding Loans
The first problem could be the fact that you have too many open loans. Having many personal loans at one time is a red flag to creditors for a number of reasons.
For starters, it is a lot of money out of your pocket. If you have several loans that you are paying on, creditors know that another one might just tip you over the edge and make you unable to meet your obligations.
Additionally, many open loans might signal to a creditor that you are in financial distress. You are unable to meet your monthly expenses, so you are using loans to fill in the gap. This is a plan that may very well end up going wrong, which makes you a bad credit risk.
To solve this problem you will need to simply pay down your debt. If you are getting disqualified because you have too many loans, it means that your debt to income ratio is off. This credit factor is simply the ratio between what you owe and what you earn. If you owe too much, lenders will doubt your ability to pay back a loan, so get your debt paid down.
2) Excessive Loan Requests
This is another issue that goes hand in hand with having too many open loans.
If you make a large number of requests in a short period of time, this signals to a creditor that you may be facing money problems. It potentially signals a borrower in panic mode and this is not a client that they want to take on.
Excessive requests also leave your true credit profile in question. How many of these requests have actually become credit accounts. Once you accept new credit, it can take 30 days to 60 days for it to report on your credit report. Thus, a number of inquiries might make a potential creditor wonder how much money you really owe and what your credit profile really looks like.
The answer for this problem is to stop applying for new credit. Those inquiries will eventually drop off and then you can apply for a loan. Inquiries will remain on your credit report for two years, but they will stop affecting your rating in just 12 months.
3) You Have No Job
There are very few, if any, lenders out there who will approve you without an income.
You might think that you are good for the money and you might even have an income that you can not prove, but this will be unacceptable for most banks. If you do not have actual income that you can put down on paper, chances are great that you will be denied a loan.
Get a job or find some income, it is as simple as that. As far as income goes, remember that it can be any money that you see on a regular basis. This could be anything from a structured settlement to Social Security payments. As long as you receive your money at set intervals, over time, most lenders will consider it.
4) There Is A Public Record On Your Credit
Public records like bankruptcies can wreak havoc on your credit rating and lenders will take notice.
While you may be able to get approved for a loan with a record such as a bankruptcy on your report, it makes your odds of approval much lower. You generally have to wait one to two years for the effects of a negative record to start wearing off. In the meantime, new credit will be difficult to obtain.
Time heals all wounds and unfortunately, with a public record it will take time to get your credit back to a place where you can be approved. This does not mean that it will take a full 7 to 10 years to recover however. You should start seeing improvements to your credit rating after a year has passed, so be patient.
5) Your Credit Is Horrible
Finally, it could just be that your credit score is horrible. Even a bad credit lender is going to want to see scores in the high 500’s to even consider a loan. If your score is not there, you will likely continue to get denied for any kind of loan except a payday loan.
Get your credit in order. While this might seem like a difficult thing to do, credit is really rather simple. Over two thirds of your score comes from just two factors.
The first of these is on time bill payment. Pay your bills by their due date and, over time, your score will go up. If you have trouble paying your bills on time, take advantage of bill reminders and automatic payments.
Next comes credit utilization, which is just how much of your credit card limit you are using. To have good credit utilization, you need to be using less than 30 percent of your available credit. That means that if you have 2000 dollars in credit, you should be using no more than 600 dollars of it.