Are you in the market for a loan? There are several loans and Credit Card options available, and you may be spoilt for choice. However, lenders are exceedingly cautious when it comes to giving out loans. Your credit card or loan may be pre-approved, but lenders and credit card issuers follow their internal guidelines before giving you a loan or a credit card. There are several reasons why you may experience credit rejections. Below we have put together the major reasons why your loan or credit card application may be denied.
1. Poor or insufficient credit history
Before making a decision on your loan or credit card application, lenders and credit card providers always refer to your credit information report. Past troubles in repaying your debts will most likely result in your loan application being denied. Information on your credit report includes:
- Credit score – Your credit score depends on your credit behavior. The scores range between 300 and 900. Any score above 750 is considered acceptable, and you qualify to get a loan.
- Financial delinquency – Loan and credit card providers are also interested to know if you have been paying your loans. Were you late in repaying your past loans? How long did you delay in repaying? Recent late non-payments will greatly harm your ability to get a loan.
- The number of inquiries – Applying for too many loans within a short time can also result in rejection.
Don’t worry if you have a poor or insufficient credit history. You can still get a loan. You can search for online lenders that are not interested in your credit history, although rates are likely to be much higher.
2. Low income and debt
Exceptional credit history is important. However, it is not a guarantee that your loan or credit card application will be approved. Lenders and credit card providers consider the amount of money you make per year and whether or not you have other outstanding debts. In some instances, you have to meet minimum income requirements for your application to go through.
3. Negative field investigation
Before your application is approved, the lender will want to do a physical verification of your home and place of work. It helps them to assess your stability and standard of living. Your loan is unlikely to be sanctioned if the lender discovers a discrepancy in your application—for instance, the wrong home address or a false place of work.
4. Job stability
Loan and credit card providers use your employment status and stability to make a decision on your loan application. Inconsistent job history could harm your application. Usually, job consistency is associated with repayment capability. Switching jobs too often is not taken very well by lenders and credit card providers.
Nobody likes rejection. Although a loan or credit card denial is not a personal jab, it may feel like one. However, you should take it positively. It provides an opportunity to look into your financial standing and better the situation. Remember, lenders will provide a reason why your application was rejected. With that information, you are in a better position to improve the situation and qualify for a loan in the near future.