Getting turned down for a loan isn’t the end of the world, but it can be frustrating. You can resolve any problems you may be having that would affect your credit and prevent you from getting a loan in the future. The key is getting your financial affairs in order before you apply for a loan. If you still get turned down, go back through your credit history and continue to clear away anything that may appear negative.
- Find Out Why You Were Turned Down
First, your lender will provide a letter detailing why your loan application was denied. Once you know why it was rejected, you can take the necessary steps to correct the situation. If you have questions, now is the time to clear up any confusion.
- Go Over Your Credit Report
Obtain copies of your credit report from the three main credit bureaus. Identify any items that are inaccurate and file disputes on each one. Knowing what is in your credit reports is essential. Inaccuracies can be costly if you file for a loan or perform any task considering your credit history. Making sure everything is correct is your responsibility.
- Find Your Weaknesses
The key is knowing your strengths and weaknesses. You need to find a working solution if you have a good income but charge too much on your credit cards. Maintain your income and learn to adjust your spending habits. Try to use your credit cards only for emergencies and pay cash whenever possible. This will could help improve your debt-to-income ratio and could also help boost your credit scores.
- Look at Other Lenders
Some lenders are stricter than others when it comes to personal loans and small business loans. More lenient lenders might charge a higher interest rate, and getting approved for the amount of money you need may be more accessible. Compare loan offers and find one that works for you.
- Think About Opting for a Co-signer
Using a co-signer is another option. Finding someone who will agree to be a co-signer may be difficult. If you have someone willing to take this risk for you, do everything you can to make the payments on time. Missing payments will affect their credit as well as yours.
- Request a Smaller Amount
Borrowing more than you need is common because it provides a “cushion.” If you can work with a smaller amount, apply again to see if that changes the outcome. Even reducing what you need by a small amount may work in your favor.
- Pay Off Your Existing Debts
Look closely at your credit reports and identify the accounts with the most minor amounts. Try to start paying these amounts down so they are easier to pay off. The sooner you can pay them off, the better your chances of getting approved for a loan if you apply again.
- Don’t Open Other Lines of Credit
Try to avoid opening any new lines of credit. While having available credit is beneficial, it could increase your debt-to-income ratio. Rent-to-own accounts and payday loans are considered “lines of credit” and could impact your credit score. Try to ensure these are paid off before applying for any other type of loan. With rent-to-own accounts and payday loans off your credit reports, your odds might be better for approval.
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- Don’t Get Discouraged
Having a loan application rejected can be discouraging. Don’t let it stop you from moving forward. Rejection is good in the sense that it shows you where you can improve when it comes to your financial security.
Help Your Financial Future with EDC Credit SBDC Financial Advisors
Contact us at Economic Development Collaborative (EDC) to get in touch with our experts for valuable insights on enhancing your credit report and boosting your chances of loan approval. Our dedicated team is committed to guiding you through the process. We specialize in taking proactive measures to help you with cleaning up discrepancies in your credit history, and paving the way for improved approval odds. Put your trust in EDC to go above and beyond to help you with securing the loan you require precisely when you need it.
