Applying for a loan takes guts. It’s a big step in the right direction for a number of reasons. Most people who apply for credit to own a car, a home or any item do so with the feeling they are in a spot of credit worthiness to have a loan approved. This is not always the case. In fact, many of these same people who have their loan denied cannot understand why. They felt they were worthy of it. Why were they refused? When a loan is not approved, there are a number of reasons for a loan denial. A number of those reasons will be discussed here.
When a loan is denied, feelings of discouragement and failure take place. The letdown is depressing. While a national database exists for unemployed persons, there is not one to tell you how many persons were refused credit or a loan. It happens to millions of people every day, much more often than most people imagine. There are a number of reasons why an institution such as a credit union or local bank will deny a loan.
Bad credit histories
One of the major reasons given is because an applicant has a bad credit history. The good news for this denial is the circumstance are corrected with hard work and dedication. A history of bad credit means a low credit score. The work begins with obtaining a copy of a credit report and discovering the blemishes making a credit score low. A low credit score is a major condition accounting for loans getting denied.
After discovering which creditors are making a credit history take a hit, work on getting these corrected or removed. Concentrate on old accounts for repair while at the same time keeping current accounts paid up and on time. When examining old credit, look at anything in the last seven years.
No credit histories
A number of applications come from people who have no credit history. Paying cash for everything is a great thing, but not when it comes to creating a history with creditors. Paying cash for items, merchandise and services means no credit past is established for review and financial institutions cannot decide whether a big or small credit risk comes with an application. Although the present circumstances for payment looks great since you owe no one, an earlier situation or examples of paying for something over a time period does not exist. No credit history is the same as a bad credit history in the eyes of financial institutions and a reason creditors will turn you away.
Age makes a difference
Loan applicants under the age of 21 are considered higher risks and will likely be denied. It doesn’t matter if the record shows a good record of payment chronicled from 18 to 21 years of age or not. Under the age of 21 is likely excluded for a loan simply because of age. There are times when a co-signer will get an approval for younger candidates. Though, this will vary from institution to institution and there is no law or federal regulation concerning this exception.
These are various reasons a loan is denied by financial institutions. There are a number of ways to correct these problems and increase the chances of getting an approval using several different avenues.
Anyone who would like to increase the chances of seeing that take place will need to create a great credit history. This may take some time. However, the work is worth the effort in the long run for a number of reasons. One of the best is opening up an option of having the ability to get to these funds during a financial emergency or dire straights. Getting one simply because you saw a great deal on a motorcycle on Ebay does not compare with needing to visit a sick relative or paying for non covered health care item. Getting your financial house in order is always a good move because you never know when you might need a loan and finding out you do not qualify is never a good thing. Discovering this at a time of an emergency is the worst thing.