Regardless of the reason for needing a loan, getting denied can be frustrating for a consumer looking to improve his or her financial well being. But rather than taking a loan denial personally, you can take steps to understand why you were denied and work to fix your credit so it does not happen again in the future.
Steps to Improve Your Credit Report
The reason a lender denies you for a loan is because something on your credit report alerts the lender that you are too high a credit risk. Depending on the state of your report, a lender can decide how much credit to lend you and at what interest rate. So instead of letting a loan denial deter you, use it as an opportunity to improve your report moving forward by following these simple steps.
Find Out Why You Were Denied
First, find out why you were denied. Under the Fair Credit Reporting Act (“FCRA”), a lender must provide you with an adverse action letter putting you on notice of the reason for denial. Understand why you were denied and work towards improving it. Lenders often provide you with a statement of reasons for the denial, which can be anything from a limited credit history, low credit score, high debt to credit ratio, too many recent inquiries, and/or too many recent delinquencies, to name a few. The denial letter will identify the credit bureau(s) that were reviewed and provide information on how to contact them.
Check Your Credit Report and Credit Score
Next, check your credit report and your credit score. After you have been denied credit, you are entitled to a free copy of your credit report from the credit reporting agency that was reviewed. Enclosing a copy of the denial letter, request a copy of your report and make sure your report and all of the information is accurate. Experts say 1 in 4 consumers have inaccurate information on their report, so it is possible that your report may have account information reporting in error.
Develop a Plan to Improve Your Credit
Third, if you have reviewed your report and your information is accurate, develop a plan to improve your credit based upon the reasons for the denial. Good credit does not happen over night and careful financial planning can help you obtain your goal. Work towards improving the reasons that you were denied, i.e. paying down debt, paying accounts on time. Once you have worked towards achieving your financial goals, develop good credit habits for the future. A good credit report will afford you more opportunity for loans at more favorable interest rates.
If you believe your rights have been violated under the FCRA and you would like the advice or assistance of counsel, contact SmithMarco P.C. for a completely free case review.