What to do if your credit is denied
Being denied credit can be unpleasant, but don’t worry—it happens to more people than you might think. If you have just tried to get a loan and been unsuccessful, stay positive! There are solutions to your cash flow problems.
In this article, find out what to do if your credit is denied.
Find out why your credit is denied
Your loan application was denied for a reason. The best way to improve your chances for the next time you apply is to find out why your credit was denied and rectify the situation as quickly as possible.
Here are a few reasons why lenders might refuse an application:
Poor debt to income ratio
This ratio compares the amount you earn each month to your monthly debt payments. Lenders will use the ratio to determine whether you will be able to afford the payments if your loan application is approved. If your income isn’t high enough to adequately cover your debts, some creditors will reject your application.
Poor or no credit history
People who have never taken out a loan before and those who have had trouble repaying their debts in the past will have more difficulty getting approved. Lenders consider credit history to be of great importance and are more likely to approve those who have proven their reliability when it comes to repaying their debts.
Things like bankruptcies and maxed-out credit cards can negatively affect your credit history. They lower your credit score and make you a less attractive candidate when applying for a loan.
A great number of credit checks
Credit checks are usually done every time you apply for a loan, unless you’re applying for a no credit check personal loan. If there are a great number of credit checks on your record, they may hurt your chances of getting approved for a loan, because lenders may assume that you have already been denied credit multiple times.
Precarious employment status
Precarious employment status (unemployment, seasonal work, contract work, freelancing, etc.) can be detrimental when applying for a personal loan.
Many creditors assess your ability to repay a loan based on your salary and the type of job you have. If your employment status is precarious, you may not have reliable income, which can lead to your credit being denied.
Too much debt
If you’re currently struggling to pay off your debts and your payments are often late, private lenders and financial institutions are unlikely to give you a loan. You’ll need to find ways to pay off your debts quickly to regain some control over your finances.
How to make sure your next loan application is approved
If your credit has been denied for one of the reasons listed above, you can increase your chances of being approved next time by following these tips.
Reduce your debt
If your loan application was declined, take a look at your debt to income ratio to determine whether you are making enough money to repay the loan. If you already have other loans or credit cards to pay off, make sure you include them in your calculations. Generally, a ratio of less than 36% will improve your chances with lenders.
Unfortunately, you will most likely need to make some sacrifices to lower your ratio (cut down on your subscriptions, change your car, etc.), but solving your money problems and getting back on track financially requires a balanced budget.
Check your credit report and correct any mistakes
Credit reports can sometimes contain errors. If you were denied a loan after a credit check, you may want to check your credit report for any errors that may have negatively affected your application.
If you find a mistake in your report, contact the credit reporting agency responsible for the report. You cannot be held responsible for computer errors or the actions of a fraudster. You are entitled to have any mistakes removed from your file.
Increase your income
Of course, earning more money is easier said than done, but income is an important factor lenders look at when you apply for a loan. If your credit is denied because they aren’t confident that you’re earning enough to pay off a loan, it may be worth trying to increase your income.
Try working overtime or finding a part-time job. You can also sell off items that you no longer use.
If you’re planning to leave your job or start a new career, it’s best to do so after your loan application has been approved. You should also have a plan for repaying the debt.
Apply for a no credit check loan
If you’ve been denied credit, don’t just throw in the towel! There’s still hope, particularly if you haven’t yet tried to get a loan online. On the internet, you can find quick no credit check loans and lenders who offer no document loans, which don’t require any advanced personal data verification.
Credit denied? DMO Credit can help!
If your loan application has been declined, don’t give up! There may be reasons beyond your control that have led to the refusal. And if you were denied credit due to the current state of your finances, there are many ways to improve the situation and increase your chances of being approved next time.
At DMO credit, you can get a quick loan regardless of your credit history—we understand that unexpected circumstances don’t always wait for you to have your finances in order. Our criteria are designed to help people get approved quickly for loans up to $1,000.