No one ever wants to be denied for a loan, and many people who get rejected for a personal loan never see it coming. You should not however be ashamed or disheartened. In today’s dire financial times banks, credit unions and other lenders are far more stringent with their loan requirements in the wake of the 2008 economic meltdown. Loan rejections are more common place today then they were less than a decade ago. Yet a loan rejection can lead towards the path of financial success.
How can being rejected lead to financial success? Simply put it can lead you to cleaning up your credit report and finances. When we desperately need a loan and get denied that loan we then see how important credit is. Those who are smart use this opportunity to take steps towards improving their financial situation. It is a tough love kind of lesson in the school of hard knocks. Take this time to become get better educated about your credit situation and take steps towards improving your record. Your record of finances at least when it comes to borrowing money is your credit report.
You should start this effort by finding out exactly why you were denied your loan or credit. The Equal Credit Opportunity act requires lenders to provide those denied credit with a written explanation that cites the exact reason or reasons that credit was denied. Often times this will reference your credit report or lack there of. You need to understand exactly why you were denied if you are ever going to correct the problem.
Your next step is to request all three of your credit reports from the three major credit reporting bureaus. You can use websites like annualcreditreport.com to get your free credit report. You need to go over every single section and verify that all information is up to date and correct. You would be surprised how many credit reports contain factual errors that negatively impact ones credit score, one study by the Federal Trade Commission pegs this number at around 26 percent of all credit reports containing at least one factual error.
Should you find any errors you need to write a dispute letter to the credit reporting agency. If you need to know the best format you can find it on the FTC website here http://www.consumer.ftc.gov/articles/0384-sample-letter-disputing-errors-your-credit-report. The credit reporting bureaus (TransUnion, Equifax, and Experian) and credit information providers are bound legally to investigate dispute claims. I am not going to lie or sugar coat things, the dispute process can take a long time and be very aggravating. In fact the process for most people is a nightmare. But it can be done and you need to do it if you want an accurate credit report.
Next you should practice the following to improve your credit:
Reduce debt: Pay off any outstanding debt, debt is a huge factor calculating your credit score.
Pay your bills on time: You need to pay your bills on time, not doing so gets reported on your credit report as a late payment and this has a huge effect on your credit score. Creditors do not care why you were late with a bill, a late payment is a late payment regardless of the reason.
Keep open lines of credit: Even if you do not use that high interest card you should keep it open and make use of it sparingly now and then and pay the balance off within the grace period. This helps build credit and you really do need 3 active credit sources on your credit report to avoid having a thin credit file. A thin credit file occurs when you have to few accounts open on your credit report, and a thin file is often worse than having poor credit.