Getting denied for a loan can be stressful. The first time I tried to finance an automobile, I found out just how challenging the situation can be. Not understanding the credit system as I do today, I thought, “Getting a loan is going to be a piece of cake.” I was mistaken. My credit was a nightmare and I had no idea how to improve my situation.
Thankfully, with age comes wisdom. If I ever find myself on the receiving end of a denial letter again, I’ll know what to do.
The first thing I learned is to remain calm. The lender’s rejection isn’t a reflection of you as a person. Honestly, the lender’s opinion has minimal effect on the decision. The lender already knows whom it will lend money to based on the guidelines that govern their decision-making processes. The process is very black-and-white. Lenders run your credit score through their underwriting formula. If you meet their established criteria, you’re a customer. If not, your application will be denied.
None of us enjoy bad news, but a denial of more credit can be a blessing in disguise. It was for me. I had never once looked at my credit report at the time I was turned down for my car loan. Thankfully, I was entitled to receive a free copy of my credit report; we all are when our credit application is rejected. When I looked at it, it was eye-opening. My report contained information about my father and grandfather who both shared my name. Not all of it was pretty, and that’s what had led to my denial. If your application is denied, take the opportunity to closely review your credit report. Look over every item. If you don’t agree with something, follow up with the creditor that reported the information or the credit reporting agency.
You’ll want to understand why you were denied so you can use that information to improve your credit behaviors and strengthen your financial situation. The lender will communicate its reasons for denying you credit, usually included in a form letter. If you don’t understand the reasoning, talk with the lender to learn more. When you know why you were turned down, you can prepare a strategy to adjust and improve your situation. For example, one of the factors that led to my denial for the auto loan was the fact that I had high balances on my credit cards. Using a budgeting sheet, I developed a repayment plan that would get me out of debt in a relatively short period of time.
Getting denied for a loan isn’t the end of good things for you. It’s the beginning of a new relationship with your credit. Consider it an opportunity to get in touch with your finances and affirm your commitment to a better future.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2015 ConsumerInfo.com, Inc. All rights reserved.