Once a loan application for a loan is completed to borrow money for a specific purpose, the potential borrower eagerly awaits the result of the application. He or she may need the funds needed to achieve their ambitions, whether for business, car purchase, or holiday.
If your application is declined, a life goal may not be fulfilled. Lenders refuse loans based on a person’s credit-worthiness and loan default risk. If you’re refused a loan that you need in emergency because your credit history isn’t the best, it may be worth looking for bad credit loans direct lenders. These lenders may be more willing to approve your application. The criteria used to determine credit-worthiness and the ability to repay loans may differ between lenders and creditors.
Those that have experienced a loan application decline may register with a credit checking agency to obtain their personal credit score and a credit report. A credit report provides the information needed to understand how the credit score contributed to the loan refusal.
Why Are People Declined for Loans?
Common reasons people are turned down for loans include:
- Not being registered on the electoral roll for voting
- Being a victim of a credit fraud and identity theft
- Defaulting on loans historically
- Having County Court Judgments (CCJs)
- A lack of credit history or interest payments
- Opening too many accounts and leaving some inactive
- Applying for too many payday loans in a short space of time
Some people with suitable credit scores may be declined loans. When this happens, it is important to understand why, including the creditor’s assessment criteria. That way, the underlying cause may be addressed. Too many loan rejections can also be detrimental to future loan prospects.
It’s not all bad news though – there are ways to improve your chances of getting a loan! We’ve outlined a few tactics below.
4 Ways to Improve Your Financial Status
A person’s credit score and rating is a reflection of their financial health and credit-worthiness in meeting financial responsibilities, such as for long and short term loans, mortgages and bill payments. Through improving credit score and rating, a person may improve their financial status.
Being credit-worthy gives lenders confidence in a borrower to approve either their long or short term loan applications. Lenders are less likely to do so where the credit score or rating is low because it indicates that the individual is at higher risk of loan repayment default. Borrowers may then have their loan applications declined or may need a guarantor for loan surety. Guarantors may include relatives or business associates. Individuals may gain insight into their credit-worthiness by registering with a credit reference agency and obtaining their credit report.
Credit reports impact long or short term lending criteria, loan terms and interest rates. If credit reports are weak, an individual may incur higher costs when applying for credit. Improving one’s credit report is a means of raising financial status and gaining cost-savings over the longer term.
The top four ways to improve financial status include:
- Providing credit reference agencies with correct credit history information.
- Closing all unused accounts and using active accounts responsibly.
- Paying outstanding debts or making affordable arrangements to do so to prevent default.
- Building a credit history where one is lacking and not making unnecessary loan or credit applications.
Having a good credit score can increase your chances of securing mortgages and loans in the future. But, if you’re still working on your credit score there are lenders who can also help secure loan for poor credit borrowers.