Did you apply for a loan? Have you got it turned down? Did you ask your lender for rejecting your application? What did they tell you? There may several reasons for not signing off on your loan application. Borrowers live under the impression that they can easily get money despite bad credit history, but the reality is more than half of them are denied.
It is not only a credit score that a lender considers deciding whether it worth lending you money or not. The lender considers several other factors like your income statement, financial commitments, the length of existing credits, and so on. Even though bad credit payday loans direct lenders no credit check, many borrowers struggle to have them approved by the lender, and it is obvious that the reason is other than your poor credit rating.
Here are some useful tips you should follow when your bad credit loan application is rebuffed:
Find out the reason
You will not be able to improve if you do not know the cause of rejection. You do not need to surmise that the loan company rejected your application for this reason and that reason. A loan company can clearly explain to you why your application was not enough strong to approve. You will jump out of your skin to know numerous reasons other than very poor credit rating.
Limited credit history is also one of the causes for not giving approval to your loan. Online lenders check the length of your payment history to know how successfully you have been managing your credits. If your credit file does not show that you have a long experience of managing loan repayments, the lender will be skeptical about your creditworthiness.
If your report highlights many applications within a short period, the lender will infer that you rely on loans for your recurring expenses and chances are you will not pay back the debt. Multiple inquiries not only pull your credit scores but also raise several doubts on your credit standing.
Incorrect information on your report such as misspelled name, the wrong residential address can also be the cause of rejection of your loan as the lender will not be able to verify your details.
Peruse your credit report
If your loan application has been denied because of erroneous information on your report, you should immediately request the credit bureau for a free copy of your credit file. Lenders usually do not tell which credit reference agency they consulted to examine your credit rating, therefore you should consult all agencies – Experian, Equifax, and TransUnion. Make sure that you read all the information in your report carefully. It may have the wrong spelling of your name, your residential address may not have been updated if you have recently moved, and an unidentified default may be lingering.
Make your action plan
Once you have identified the reason for rejection of your loan application, you should work on that.
Limited credit history: In order to show the length of your credit, you need to take out a new loan. However, a small loan cannot be effective to achieve your goal as it will e paid in a lump sum. The loan that you pay back over an extended period clearly explains your financial commitment. Therefore, you should apply for installment loans for bad credit with no guarantor. These loans will allow you to pay off the debt in equal monthly installments and they charge no fees.
Multiple credit applications: There is only one way to resolve the issue that you should apply to lenders that run a soft credit check. Remember that these inquiries will not show up on your report, but the details of your loan will be reported to the agency. Do not apply for a new loan unless the next six months.
Errors on your report: Go through your report and then dispute the error immediately. Ask the credit reference agency to fix those errors. This entire process may take 30 days, so you need to be patient.
Nobody likes to be rejected, but it gives you an opportunity to improve your credit report. You can successfully take out a bad credit loan if your credit report has no issue other than a bad credit rating.