Why Loans Are Denied & What To Do Next
There are some common reasons why a loan is denied. This can be frustrating if you don’t know why. We share loan request rejections and what can be done to improve your situations for future loan applications.
Loan Reject Reason: Low Credit Score
A low credit score can be the result of making late payments, defaulting on a loan, having big credit card balances, having too much debt, or even being a fraud victim. You have a right to check your credit report for free each year at the main credit bureaus and you should take advantage of that. If you bank with Fidelity Bank, your credit score monitoring is included with our digital banking offerings. Learn how to get started here. Or you can visit a resource like annualcreditreport.com and learn what you need to do. Inspect your report and work on fixing any errors you might find. If there are no errors, there are other things to start working on.
Related: Did Your Credit Score Drop? These Common Mistakes Might Be Why…
Loan Reject Reason: Too Much Debt
If the problem is too much debt, you can work on a plan of action. Start spending less whenever possible, and make sure you pay your bills. That means paying on time and getting things paid off. Lenders aren’t going to give you money if they don’t think you’ll be able to pay them back. Once you get your debt under control, try applying for a loan again.
Loan Reject Reason: Lack of Credit History
Lack of credit history can also be a problem. If you have never borrowed money, a lender might be reluctant to give you credit because you have no track record of repayment. Getting a credit card or being added to someone’s account can help establish a credit record. You might even consider asking a family member or friend to co-sign on a loan with you. Just be sure you enter this option responsibly because a co-signer becomes obligated for the loan as well.
Loan Reject Reason: Error on Application
The easiest thing to fix would be a mistake — such as a wrong address, telephone number or Social Security number — on the loan form. Save yourself the hassle by double- or triple-checking any forms you fill out.
While being turned down for a loan can feel like a big setback, be sure to take the time to fix the things you can and begin work on improving your credit rating. By reducing debt and controlling your spending, you can improve your chances of getting a loan in the future. And a better credit rating can even lead to lower interest rates, which means you’ll pay less in the long run.
For small business owners seeking a loan, check out our top tips to help prepare for requesting a loan.
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