There’s no doubt about it, getting your application for credit is denied a real bummer. But it can also be a wake-up call to help you get your financial house back in order.
We help consumers every day who’s credit is denied figure out the best course of action to move forward.
Here’s what we usually recommend:
The first thing to do is to figure out why your credit card or loan application was denied.
You should get an explanatory letter from the bank or lender in two weeks or less that explains why they denied your application. The reasons may include negative remarks on your credit report, your credit score, your work history, or your debt to income ratio.
If the problem is your credit report, you are entitled to free copies of your credit report from whichever of the three credit reporting agencies was used by the lender. If your application for credit is denied because of your credit score, the lender will provide you the score that they received from the credit reporting company they used to check your credit.
Editor’s note. Your credit denial will not affect your credit score. There’s no way for any future creditors to know whether you were denied the account or if you just decided not to open the account after applying for it. The inquiry made when you applied for the account will stay on your credit report. Inquiries like this may temporarily drop your score a little bit, but the effect is usually short-lived.
If the issue was your work history, your income, or your debt to income ratio, first double-check your initial application to make sure you did not make any mistakes. Leaving a gap in your work history or incorrectly entering your income could easily lead to a denial.
If your income is too low, you could always try to get a better job or ask for a raise. If you’ve only been with your current employer for a few months, sit back and give it some time. The longer you stay with one employer, the more stable you appear to lenders and the more likely you are to get approved next time.
Now is also a great time for you to reevaluate why you were applying for new credit anyway. Do you need more credit to keep yourself afloat because your spending is not under control? Where you applying for a card with benefits like frequent flyer miles or cash back? Or did you just think it would be nice to have an extra credit card in case of an emergency?
If the banks think your income is not sufficient to support a new line of credit… it probably isn’t. Take a moment to reevaluate your spending and create a budget. You may discover that you do not need any more credit after all.
Then, carefully review your credit reports.
If you see negative remarks, late payments, or delinquent accounts, it’s time to do some work on your credit. Consider NCES credit restoration to help you address these concerns quickly and easily.
Not only will you likely get a significant bump in your credit score, but it will be much easier for you to get approved for a new line of credit faster.
I’m ready to restore my credit! Schedule my free consultation today.
Finally, try some other ways to improve your chances of credit approval the next time.
One of the factors that go into approval or denial is your credit utilization ratio. This is a measure of how high your balances are compared to your credit limit. When you have balances that are very close to your credit limit, and are applying for even more credit, you are sending the message that you are not a responsible borrower. We recommend this method for paying down balances in an organized and effective way.
Another way to quickly improve your chances of approval the next time you apply for credit is to become an authorized user on a family members credit card. If you have a family member with excellent credit that also has a credit card with a very high limit and a very low balance, you can “borrow” their excellent credit history by becoming an authorized user. This may be a little tricky to work out, but we’ve got more details here to help you.
4 Ways to Boost Your Credit Score Fast
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If you were told that you were denied credit because you have too many open accounts, you can strategically close older cards that you no longer use. Just remember that closing an account decreases your total available credit, which also recalculates your utilization ratio. You may see a small dip in your credit score when you close an older account, but it will usually be temporary, especially if you are working diligently on paying down your other balances.
Another way to improve your chances of being approved the next time you apply for credit is to get a secured credit card. If the denial was initially because of a short credit history or low credit score, a secured credit card will give you the opportunity to build up your credit profile. Secured cards require a security deposit, and are easier to get approved for. But they work just like a regular credit card and help you build your score. Learn more about secured cards here.
Whatever steps you do take after your credit is denied, keep an eye on your credit report and manage your spending well. You can try again after several months.
But, DO YOUR HOMEWORK first! Before applying for a new credit card or loan, call the bank making the offer. Ask exactly what their requirements are for approval. If your income, credit score, and credit history don’t match up… don’t apply! Do a little more research to find an offer that does match your situation. In the meantime, keep working on your credit and let us know if we can help.
If you have any questions, please give us a call at 770-952-5168 or contact us online.
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This information is intended for informational and educational purposes only and not as legal advice. If you have concerns about your credit report, harassment, identity theft, illegal collections activity, garnishments, or property liens, you should consult an attorney who specializes in consumer rights and defense.