What Reasons Can Your Loan Request Be Denied?

Bad Credit history
If you apply for a loan there are a number of reasons why you could possibly be rejected. The number one reason you could be rejected is due to not paying your debts on time. Sometimes past due debts will get your request for a loan rejected without you ever speaking with a representative. If you have past due credit some companies will use an automated credit scoring system and if your credit information doesn’t meet certain guidelines you will be rejected. If you are able to speak with a representative then you have a chance to explain the derogatory credit.

Insufficient credit history

Sometimes you may have credit which is paid on time but your credit file could be brand new. If you have only been on file with the credit reporting agencies for 6 months or less then you could be rejected. More lenders like to see at least one year of established credit history. Utilities don’t count as established credit, in fact utilities don’t show up on your credit report.

Excessive debts

Having too much credit can cause your credit application to be rejected. If you are using up 30% of your available credit then there is a good chance you could be rejected. The credit analyst will probably want to ask more questions such as how you accumulate so much debt.

Inquiries

Every time someone takes a look at your credit report they leave an inquiry. Too many inquiries can cause your credit application to be rejected. Inquiries remain on your credit file for two years.

Insufficient income

If your income is not enough to support the amount of debts you have accumulated your application can be rejected. If you are making minimum wages and you are trying to get a loan for $15,000 your application will be denied.

Bankruptcy

If you have filed for bankruptcy your loan request will be denied. After filing for bankruptcy you must have re-established credit with new creditors for a period of 2 to 3 years in order for creditors to consider giving you a loan. Therefore a bankruptcy does not stop you from receiving credit in the future.

Time on job

If you have not been on your job for a sufficient amount of time you could be rejected for a loan. Some creditors like to see that you have been on your job for one year at least and others like to see at least two years on the job. Sometimes it depends on the type of loan.

Lack of collateral

If you are trying to apply for a $20,000 loan and you do not own your home or any other types of assets to use as collateral your loan request could be denied. A lot of lenders will only loan money up to $3,000 to $5,000 without having the need for security or collateral. Other lenders will loan out even less than that without you putting up some type of security.

Irregular income

If you are a commissioned sales person and your income is not received on a regular basis you could also be denied. Your income will be considered irregular.

Of course these are only some of the reasons that could cause your credit application to be denied. These are not all written in stone. Some of these can be overcome with the proper explanation and by adding a co-signor. Be advised that even with the proper explanation and a co-signor some of these will not be easily overcome and your request could still be denied.