Denied Credit? What Do You Do?
It is becoming harder and harder to obtain credit. There are many reasons for this. Because the country is in a recession, the banks are becoming more picky about when they approve credit. In today’s world, you can have a moderately decent credit score and still end up being denied credit. It is frustrating when you apply for credit and realize that you have been denied. You may be wondering what to do next. Is there any action you can take to make sure this does not happen again? Here are the steps that you need to take in order to avoid being denied in the future.
Learn Why You Were Denied Credit
Often, when you apply, you will receive a denial letter in the mail. This letter can provide you with valuable information. It is important to not throw away that letter until you have gathered the information that will help you. In that letter, there will be reasons why you were denied the credit. These reasons can say things like too much outstanding debt, too many open accounts, or delinquent accounts. No matter the reasons, this will give you a place to start. If you do not understand the reason why you were denied, then do not be afraid to call the creditor. They may use wording on the letter that is confusing, but you can easily get it explained with a simple telephone call.
Raise Your Credit Score
The main reason why you would be denied credit would be a low credit score. There are so many factors that can negatively affect your score, and many of them stay on your records for years. Start by determining what is wrong with your credit score. If the problem is that you do not have enough credit, you can do a few things to build this up. Try getting a credit card. You may want to consider a secure credit card, which requires you put a deposit on it to protect from defaulting. No matter what, you will need to do something to establish credit.
There are many problems that could lead to negative marks on your credit score. Here are some things that could affect your credit and what you need to do to repair them.
- Late payments – These will be on your credit record for three years. There is nothing you can do about that, but you can make sure you do not make any more late payments.
- Too many open accounts – close any accounts that have a zero balance. These old accounts are hurting your credit for no reason. If you have different accounts that you could consolidate, then do that.
- Too high of a debt ratio. This one may take some time, but you should do your best to pay down the debt. The more you can pay on it, the better.
- Too close to limits. If you have credit cards that are maxed out, then you need to pay them down. Be sure to try to pay them down so that you leave about 10% of your limits open.
Wait Before You Apply Again
When you realize that you have been denied credit, your first reaction may be to turn around and apply again immediately, but this would be a mistake. First of all, the more you apply for credit, the more times your report will be checked and this can actually have a negative affect n your report. Second, this will give you no time to clean up your credit report and raise the score. You need to take some time, if at all possible, do some work on your score, and then try reapplying for credit.
Consider a Different Creditor
If you have been denied for something like a credit card, you may have been trying to apply for a very strict card. You can find out what a company requires to get approved before you apply. This will give you a better idea of whether or not you actually have a chance of getting approved. Avoid any credit situations that have extremely strict rules, or you will just get denied and then you will have another credit check on your report.
With the economy as it is today, there is a good chance you could get denied credit when you need it. However, there is action that you can take in order to avoid getting denied again. Make sure you act quickly so that you will be able to get approved for the credit next time.