Financial crises, a rise of unemployment, and the difficult epidemiological situation around the world have made 2020 a hard year to get a loan. According to the recent report conducted by Bankrate, 21 percent of US consumers got their application for a credit rejected.
With this in mind, the question of why lenders reject loan applications are becoming more acute than ever before. We have prepared a list of situations and reasons why such a pitiful event may take place:
1. When You Have Too Many Debts
Even if your credit score is high and your credit history is an example to follow, having too much debt is a potential reason for rejection. The bank merely doubts your ability to repay them in case of emergency.
1. When Your Income Isn’t Sufficient
The same is relevant here: in spite of brilliant credit history, every lender has the right to set the milestone for net income. If you fail to meet it, you get rejected. Besides, this aspect shapes the debt-to-income ratio, which takes an important role during the evaluation of your reliability.
1. When It Has Passed Little Time Since You Took a Loan Last Time
Your lending behavior is significantly shaped by the frequency with which you borrow money. The higher it is, the more chances of rejection arise. It’s not about credibility but rather a financial discipline.
1. When You Provided Incorrect Data in Your Credit Report
Your credit report should be updated. It means if you took new loans or closed old credit cards, it should be stated. Otherwise, you are going to be rejected. By the way, it’s one of the most common reasons.
1. When You Are Employed for Insufficient Amount of Time
Lenders have the right to set the standards for how many days you must be employed in order to receive borrowing. For example, at Payday Depot, it’s only 90 days, while many other organizations require half a year or even more.
1. When You Are Involved in a Credit Card Default
Credit history maintains data about credit card default for 7-10 years. Hence, you can’t get a loan within this time. Even if, let’s say, five years passed, this can still be a valid reason for rejection.
1. When You Have Made Several Applications in Different Places
When you apply for a loan in several institutions, lenders immediately get a red flag that you are in serious financial trouble. That’s why the first and even the second lender can approve your application. Further on, however, you are highly likely to be rejected.
These factors are the basics for you to pay attention to when applying for a loan. Considering them, you will significantly reduce the chance of rejection. Yet even complying with all of them doesn’t always ensure a positive outcome.