Credit facilities are necessary from time to time to enable us to fulfill financial obligations that may need a huge amount of money that we cannot raise upfront, but that we can manage to pay over time in small installments. For example, buying a home or a vehicle, or financing a business project are some expenditures that may need huge outlay. To qualify for credit, you must have a good credit history, an acceptable credit score to demonstrate that you can repay the loan, and several other things that the lenders deem critical.
So, what are some of the factors that may make lenders deny you credit? Here are some:
No credit history
You could be thinking that having no credit history is a good thing since it does not show any debt problems or defaulted payments on your credit file. However, having a blank slate can make lenders take a step back. Potential lenders are interested in seeing that you can manage credit. So, if you have never borrowed before, there is no information for them to use to gauge your creditworthiness. Mind you, your income is of no use when it comes to your credit history, since savings and current accounts do not appear on the credit report and thus cannot assist you to get credit.
Poor payment history
If you have a history of missed payments, your credit applications may be turned down, mostly in the short-term. As the lenders are deciding whether to extend you credit, they need to see a history of consistent repayments every month, and it is pretty evident that missed payments show the opposite. Also, missed payments lower your credit score (rating), leaving a bad impression on your credit file for some time, like six years. The more recent the defaulted debt, the higher the possibility of rejection. You may need to work with professionals like boostcredit101.com to improve your credit score to increase your chances of getting credit at better rates.
Seeking too much credit in a short amount of time
Requesting too much credit within a short duration portrays a desperate case, and lenders may be alarmed that you are looking for too much debt at once. Each credit application you make, irrespective of the amount, appears on your credit file, and this information is accessible by other lenders. Such a pull is referred to as a “hard search,” which happens every time you officially hand in a credit request. It is noteworthy that some pulls, like when seeking credit for a car or a home, are put together and not portrayed as several searches, thus reducing the negative impact. Also, any time you conduct a pre-check before applying, the lender does a “soft search,” which does not taint your credit report.
Your loan balances are too high
If your existing loan balances are too high, lenders may hesitate to issue you new loans or a credit card, as they may fear that you will miss repayments due to your already heavy burden. You should repay your loans to improve your chances of being extended credit.
Your income is too low
The amount of income required for you to qualify for some loans or credit cards varies with lenders or card issuers. Having lower income than the lender expects may cause them to turn down your application. Also, not having an income of your own can cause you to be denied credit. After all, how are you going to repay?
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