Avoid the 5 Most Common Reasons for Credit Denial

Thursday, August 28, 2008

Learn how to get the loan you want, when you want it. Avoid the 5 most common reasons for credit denial, Improve your chances of getting the loan you need to buy that dream home, new car or to just payoff old debts.

The five most common reasons for credit denial based on a credit report are as follows:

Delinquent credit obligations. Late payments, bad debts, or legal judgments against you make you look like a risky customer. Get A copy of your credit report and remove any errors.
Credit application is incomplete. Perhaps you left out some important information or made an error on the application. Any large discrepancy between your application and your credit file can count against you. The lender will wonder if you are hiding something. Always double check your application.
Too many inquiries. Inquiries are made whenever you apply for credit. Requesting your own report also counts as an inquiry, but is usually not held against you. At the creditor’s discretion, as few as four inquiries within six months’ time may be considered a sign of excessive credit activity. The creditor may then presume that you are trying desperately to get credit and are being rejected elsewhere. *NOTE* Generally, several inquiries for a "major" purchase, like a home or auto loan are counted as "one" inquiry.
Errors in your credit file. These may arise simply from typing mistakes, or from confusing your name with someone else’s similar name. Since the credit bureaus handle millions of files, the possibility for error is substantial. Errors can be found and corrected only by carefully reviewing your file for accuracy at least once a year and then taking the necessary steps to correct any errors that you do find.
Insufficient credit file. Your credit history is too scanty for the type or amount of credit you requested. You need to develop your credit history more fully before qualifying for the level of credit you are now requesting.

Always examine your credit record before applying for credit, because you don't want any surprises and have a credit denial letter sent to you.
A credit bureau may confuse you with another individual, carry erroneous information in your file, or perhaps include false, incomplete or one-sided information provided by a creditor.
Most of these credit denial problems can be resolved once you understand the procedures.

Periodic checking of your credit report is important because credit bureaus can and do make mistakes in their credit information.


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