Loan Rejection Reasons and Solutions
One the biggest reasons for rejection has to do with timing. A great credit score isn’t very strong if you have only had credit for a short period of time. The length of your credit history is important. If two people have the same score, the lender sees it as the longer the credit history, the less risk in lending. Lenders also have rules as to how long you have had a job or residence. Jumping from job to job, or address, could also flag you as a borrowing risk. Other factors, such as a recent Modesto bankruptcy, could mean an automatic rejection.
How to Fix It
Wait until you have a strong credit history for over a year before applying for any new credit. If you have recently changed jobs or address, wait at least 6 months before applying for new lines of credit. Generally, it is recommended that you wait six months to a year following a Modesto bankruptcy before seeking new lines of credit. Following a Modesto bankruptcy, you should rebuild your score using existing lines of credit to establish a consistent payment history before seeking out new lines of credit or a loan.
Another reason for rejection is in the details. Certain types of credit and loans, like a mortgage, use your credit score as the key to unlock only the first gate. In order to unlock the remaining gates, you will have to pass other requirements such as income, down payment amount, and other debt. Another detail that matters is the credit score calculation model. The FICO scoring system alone has 28 versions, all of which could give you a different number.
How To Fix It
When it comes to the details of your type of loan, be sure you know what is required before you apply. If you are looking at applying for a mortgage you should take the time to save up more than the minimum down payment beforehand. Know exactly what income-to-debt ratio you carry and pay down other debts to lower this ratio before you apply. While you can’t really control which version is used to calculate your score, you can ask your lender to pull your score from all three bureaus to compare the assigned score.