Reasons You May Be Denied Credit
Several factors other than your employment status can place you in lenders’ “too risky” group that lead to a potential denied of credit. Creditors must give you notice when they deny your credit application or they change the terms of an existing line of credit. Here are legitimate reasons an issuer may pass you up for a new line of credit.
No Credit History
A lack of credit history could be an obstacle to getting a new credit. When a potential lender runs a credit report on an applicant with no prior history, the report will come back with a statement saying that “no record found”. Hence, the lender can’t measure your repayment performance due to no history record that shows that you have a good credit score. Lenders most probably will not take the risk to approve any credit to you. You should build your credit with secured credit card, personal loan or be an authorized user of your family or friends credit account.
Poor Credit History
A credit report contains codes that help a potential lender evaluate positive or negative information. Negative factors can be late payments, charge-offs, delinquent accounts, repossessions, judgment, tax linens and so on.
Hard Inquiries
The lenders have the right to view your credit reports if you apply a credit from them. Every time you seek credit, it is reported on your credit record that your authorized an inquiry by the lender on a particular date. If you were turned down, the next credit account you seek will probably turn you down as well. Five inquiries of this nature within six-month period can hurt your chance of getting credit. Credit reporting bureaus refer to this kind of inquiry as hard inquiry. A soft inquiry is when you do not actively seek credit; rather, a lender comes to you with a solicitation for credit. Soft inquiries are not recorded on your report; only hard inquiries are.
Too Much Debt
When creditors evaluate your application they look at how much monthly debt you have compared with your monthly income. If you exceed the recommended ratio, or are already deep in debt, you application may be turn down.
Public Notices
Judgment or warnings against you have been recorded with a county official and are therefore a matter of public record is likely to affect your ability to get a new line of credit. These notices can include bankruptcies, judgments, tax liens, foreclosures and similar notices.
Other Reasons
Other reasons your credit application may rightfully be declined include the following:
- Insufficient income
- Not enough income for the amount requested
- Inability to verify income
- Inability to verify employment
- Incomplete credit application
- Bank references established less than six months before
- Non-citizens without permanent resident status (no green card)
- Unlisted telephone number
- No checking or savings account
- Fraud alert placed on credit information and no proof or Social Security identification
Whenever a creditor denies an application, it must notify the applicant in writing, citing the reason for the denial and listing of credit bureaus it consulted in reaching the decision. You have the right to a free credit report from the agency it cites within 60 days of your rejection.
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